Friday’s August employment report sent the 10-yr out of its one month range, increasing it to 2.94% (2.90% had held any increase since mid-August). Mortgage prices plunged 32 bps. The breach projects a move for the 10-yr to 3.00% to find its next technical support. All along when rates were generally stable, the consensus outlook held that rates would increase as growth increased and inflation levels edged higher driven partly on trade issues that will drive prices of goods higher. The August employment report Friday also confirmed wages are slowly increasing, with average hourly earnings in August increasing 0.4% and yr/yr 2.9% from 2.7% in July and up from estimates of 2.8%.
Last Friday President Trump increased tariffs on China. Data released Saturday showed that China’s trade surplus with the U.S. widened to $31.1B during the month, US importers are front-loading imports ahead of what is coming close to an all-out trade war with the president, who is saying he will go all in ($500B) at a “moment’s notice”; an additional $267B in Chinese goods on top of $200B he has threatened. China’s Ministry of Finance said it will raise export rebate rates for 397 goods, ranging from lubricants to children’s books, meaning that firms shipping such products abroad will pay less value-added tax. The new rates will become effective from Sept. 15, the ministry said in a statement on its website. China’s economy is continuing to find traction and the outlook with trade likely to have negative effects on the country.
At 9:30 am EST the DJIA opened +111, NASDAQ +32, S&P +13. 10 yr at 9:30 unchanged.
At 3:00 pm July consumer credit is expected to add +$13.9B overall. As usual we will focus mostly on revolving credit.
Treasury will sell $73B of 3s. 10s and 30s this week.
This Week’s Calendar:
3:00 PM July consumer credit (+$13.9B)
6:00 am Aug NFTB small business optimism (108.02 from 107.90)
10:00 am July JOLTS job openings (6.665m from 6.662m in June)
- July wholesale inventories (+0.7%)
1:00 pm $35B 3 yr note auction
7:00 am weekly MBA mortgage applications
8:30 am Aug PPI (+0.2%, core +0.2%)
1:00 pm $23B 10 yr note auction
2:00 pm Fed Beige Book
8:30 am weekly claims (210K +7K)
- Aug CPI (+0.3%, yr/yr 2.9%; core CPI +0.2%, yr/yr 2.3% down from 2.4% in July)
1:00 pm $15B 3 yr bond auction
2:00 pm Aug Treasury budget (-$164.0B)
8:30 am Aug retail sales (+0.4%, ex autos +0.5%)
- Aug Import and export prices (imports =-0.1%, exports +0.2%)
9:15 am Aug industrial production and capacity utilization ( production +0.4%, cap utilization 78.3% from 78.1% in July)
10:00 am Mid-month University of Michigan consumer sentiment index (97.0 from, 96.2 in Aug)
- July business inventories (+0.5%)