The 10 year Treasury spiked as high as 1.73% yesterday, that’s a 20 basis point jump since September 6th. Note that 1.69% is considered a key technical level. This follows last week’s volatility as investors were “near certain” of a September rate hike and a feeling that central banks are nearly “out of bullets” after the ECB’s Mario Draghi offered little stimulus in his highly anticipated remarks. Markets were calmed on Monday by Fed Governor Lael Brainard’s highly dovish comments, which were significant due to their timing; she was the final Fed official to speak going into the quiet period before the September meeting. So now markets are expecting no increase next week. This means that if there is an increase, markets will most likely react very negatively and will be reminiscent of the 2013 “Taper Tantrum”. This week’s reports over the next few days will now be watched closely: Core PPI, Industrial Production, CPI, etc. Meanwhile; yesterday’s blockbuster median income report showing a 5.2% increase (the largest single increase since record keeping began in 1967) indicated an economy possibly “turning the corner” after the great recession. Gains by the poor and middle class are sure to factor into future Fed decisions, but most likely not this month. stay tuned
