Long-end Treasury prices are higher and the curve flatter following the Bank of Japan’s (BOJ) decision to keep its policy for future asset purchases unchanged. There had been some speculation that the central bank might increase its target yield for government debt, which would be expected to impact long-end European and U.S. government yields as well. This speculation contributed to the recent curve steepening in the U.S., but the BOJ chose to maintain its ultra-dovish policy for the foreseeable future. However, in the press conference that followed, the BOJ Governor Kuroda did provide a slightly hawkish twist, saying that the range of allowable yield deviation from the target level will double from 10 bps to 20 bps. Major global equity markets are mostly higher on the day, and S&P 500 futures are currently up 4 points.

June personal income and spending was largely in line with expectations, and the inflation data (PCE) was relatively tame (also close to expectations). The Employment Cost Index rose 0.6% in Q2, which was 10 bps below expectations and a 20 bps decline from Q1. On a year-over-year basis, ECI was up 2.8% in Q2, the highest since Q3 2008. Today’s data shows that wages and inflation continue to rise, but at a stable and more gradual pace than what was experienced in the first quarter.

Jason Haley
Managing Director, Investment Management Group

07/30Pending Home Sales MoM0.10%0.90%-0.50%
07/30Pending Home Sales NSA YoY-4.00%-2.80%
07/30Dallas Fed Manf. Activity3132.336.5
07/31Personal Income0.40%0.40%0.40%
07/31Personal Spending0.40%0.40%0.20%
07/31Real Personal Spending0.40%0.30%0.00%
07/31PCE Deflator MoM0.10%0.10%0.20%
07/31PCE Deflator YoY2.30%2.20%2.30%
07/31PCE Core MoM0.10%0.10%0.20%
07/31PCE Core YoY2.00%1.90%2.00%
07/31Employment Cost Index0.70%0.60%0.80%
07/31S&P CoreLogic CS 20-City MoM SA0.20%0.20%0.20%
07/31S&P CoreLogic CS 20-City YoY NSA6.40%6.51%6.56%
07/31S&P CoreLogic CS 20-City NSA Index211.94210.17
07/31S&P CoreLogic CS US HPI NSA Index202.95200.86
07/31S&P CoreLogic CS US HPI YoY NSA6.38%6.41%
07/31Chicago Purchasing Manager6264.1
07/31Conf. Board Consumer Confidence126126.4
07/31Conf. Board Present Situation161.1
07/31Conf. Board Expectations103.2
08/01MBA Mortgage Applications-0.20%
08/01ADP Employment Change186k177k
08/01Markit US Manufacturing PMI55.555.5
08/01Construction Spending MoM0.30%0.40%
08/01ISM Manufacturing59.360.2
08/01ISM Employment56
08/01ISM Prices Paid75.376.8
08/01ISM New Orders63.5
08/01FOMC Rate Decision (Upper Bound)2.00%2.00%
08/01FOMC Rate Decision (Lower Bound)1.75%1.75%
08/01Wards Total Vehicle Sales17.05m17.38m
08/02Challenger Job Cuts YoY19.60%
08/02Initial Jobless Claims220k217k
08/02Continuing Claims1750k1745k
08/02Bloomberg Consumer Comfort59
08/02Factory Orders0.70%0.40%
08/02Factory Orders Ex Trans0.70%
08/02Durable Goods Orders1.00%
08/02Durables Ex Transportation0.40%
08/02Cap Goods Orders Nondef Ex Air0.60%
08/02Cap Goods Ship Nondef Ex Air1.00%
08/03Trade Balance-$46.5b-$43.1b
08/03Change in Nonfarm Payrolls190k213k
08/03Two-Month Payroll Net Revision
08/03Change in Private Payrolls190k202k
08/03Change in Manufact. Payrolls25k36k
08/03Unemployment Rate3.90%4.00%
08/03Underemployment Rate7.80%
08/03Average Hourly Earnings MoM0.30%0.20%
08/03Average Hourly Earnings YoY2.70%2.70%
08/03Average Weekly Hours All Employees34.534.5
08/03Labor Force Participation Rate62.90%
08/03Markit US Services PMI56.256.2
08/03Markit US Composite PMI55.9
08/03ISM Non-Manf. Composite58.659.1