The yield on US Treasury bonds reaches ten-year highs
- US Treasury yields continue to rise to the highest levels in a decade, supported by strong labor market data and higher revisions to past numbers.
- Higher interest rates are pressuring the US stock market and commodities. Investors are flocking to US Treasury bonds, which are becoming increasingly attractive in the face of a still complex inflationary environment.
- Meanwhile, the US House of Representatives passed a bill extending government funding for 45 days, allowing the Fed to have access to economic data until its next meeting on November 1.
labor market in the US remains strong, raising concerns about the pace of
improvement in the country's inflationary environment, as the total inflation
index rose again in its latest reading, also driven by higher energy costs.
labor market in the United States continued to grow in September, with the
creation of 336,000 jobs, almost double market expectations. Despite this, the
good news is that wage growth is stabilizing, with an average increase of 0.2%
per hour of work (4.2% increase on a year-on-year basis).
Those numbers are especially important for defining the path of interest
rates in the US, as they are used in conjunction with other indicators, such as
the consumer price index (CPI), to measure economic activity and inflation. A
very strong labor market indicates an expansion of consumer demand, which can
lead to higher prices.
there is some disagreement among monetary authorities about a new interest rate
hike by the end of the year, there seems to be a consensus that interest rates
need to remain elevated for “longer than desired”.
Therefore, the market is paying attention to economic indicators to predict the Fed's decision on November 1, and the latest US jobs report has increased the chances of a new increase in the interest rate.
Image 1: Non-Farm Payrolls in the US
Source: United States Bureau of Labor Statistics
US Treasury bonds continue to rise
Image 2: Yield on US Treasury Bonds (%)
The latest European Central Bank's monthly credit data reveals that the drag on spending caused by reduced credit provision is now considerably more pronounced than it was during the depths of the Euro crisis. As a result, the risk of economic contraction in the latter half of the year is on the rise.
The credit impulse for households and non-financial corporations within the Eurozone declined to -5.2% of GDP in August, down from -3.7% in July. This shift lowered the three-month average to -3.9% from -2.9%. M3 money supply growth fell below the consensus forecast, declining to -1.3% year over year from the previous month's -0.4%. These figures contrast with the median estimate of -1.0%.
Image 3: EU PMIs