- The 10-year US Treasury yield rose to 4.34% on August 21st – the highest since November 2007 – but has since pulled back on signs of softening in the US labour market. The 10-year yield dipped to 4.09% yesterday, ahead of payrolls later today. Nominal US Treasury yields remain above 4% across the entire yield curve (pages 2-4)
- Real yields also stay elevated: the 10-year inflation-indexed yield hit 2.00% on August 21st, the highest since July 2009, before slipping to 1.85% as of yesterday. Breakeven inflation rates have come down a bit more (pages 5-10)
- However, WTI crude oil prices have risen 16.7% over the past three months, and are up 4.1% YTD (page 35)
- Real yields in the UK stay higher (page 21)
- Growth concerns around the Eurozone and UK resurface, but have not managed to push Bund or Gilt yields much lower, yet, due to persistent core inflation (pages 19-28)
- The jump in Treasury yields in the first three weeks of August weighed on stocks initially. The recent dip in Treasury yields has given equities a lift, however, with IT (+4.2%) and communication services (+4.0%) leading the gains so far this week. Technology shares are responding quickly to any dip in Treasury yields, for now. The S&P 500 recovered some of its losses in August, but was still down 1.8% for the month overall (pages 42-52)
- The stock market remains expensive, vis-a-vis the bond market (pages 11-12)
- Yen still weakening. China steps up efforts to support the RMB (page 29)
- Negative sentiment around China reached fever pitch over the past couple of weeks. But the reality may be more nuanced. It is worth flagging the recent breakout higher in iron ore futures, and oil prices too. Industrial metals have not fallen by much in August, either, in contrast to the proliferation of commentary on China (pages 33-37)
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