August 6, 2024 Headlines

So much for calmer markets as we approach likely easing from the Fed in the coming weeks/months. Treasury yields are starting the day 4-6 basis points (bps) lower after yesterday’s volatile rally.

In a 24-hour period, the 2-year yield has traded in a 35 bp range, but that’s small potatoes relative to Japanese equities. After experiencing a 12% loss yesterday, the Nikkei rallied more than 10% today. U.S. equity futures are up 50-75 bps a little over an hour before the open.

In addition to correcting overbought conditions in recent days, Treasuries are prepping for $125 billion of new supply of 3-year, 10-year, and 30-year Treasuries this week, beginning with today’s $58 billion 3-year auction. Yesterday’s ISM services report for July surprised to the upside, including a much better than expected employment reading, but in a sign of the current market bias, it received roughly half the reaction as last week’s disappointing ISM manufacturing report despite the U.S. economy being much more skewed to services than manufacturing. Also, both Fed leaders that spoke yesterday, who are typically more dovish, pushed back against an overreactive Fed to market volatility. Chicago Fed President Goolsbee avoided any mention of a intra-meeting rate cut, saying they “can wait for more data before the September meeting.” In a separate appearance, San Francisco Fed President Daly said they “well make policy adjustments as the economy delivers more data.”

Jason Haley
Chief Investment Officer