Tonight’s two PMI reports aren’t significant enough on their own, but in the current macro environment, they’re “adding fuel to the fire.”
Put simply, the two reports point to the typical pattern of resilient expansion in manufacturing and marginal cooling in services, meaning the economy as a whole is still in expansion territory.
Economic expansion + high oil prices = heightened inflation concerns = the Fed still has reason to remain hawkish or even raise rates. So in the current environment, these two reports really aren’t ideal.
That said, the data did provide a short-term test of the bond market’s pricing logic. The 10-year yield fell below 5%. If the market had enough confidence in long-term bonds, tonight’s data would have pushed the 10-year yield even lower. But we saw the opposite: a rebound.
This means that a 5% long-term yield is attractive to investors, but it only temporarily offsets the pressure from long-term inflation, fiscal concerns, and the term premium. It hasn’t yet given investors enough confidence to keep buying long-term bonds and drive yields lower!
For risk assets, the bond market’s current trajectory is a mixed bag: in the short term, it has paused the drain on capital, but over the medium term, 5% yields are still weighing on risk assets.
With Brent at $116 and WTI at $102 right now, it’s really hard to feel good about things—this is painful!#股票财报季
Put simply, the two reports point to the typical pattern of resilient expansion in manufacturing and marginal cooling in services, meaning the economy as a whole is still in expansion territory.
Economic expansion + high oil prices = heightened inflation concerns = the Fed still has reason to remain hawkish or even raise rates. So in the current environment, these two reports really aren’t ideal.
That said, the data did provide a short-term test of the bond market’s pricing logic. The 10-year yield fell below 5%. If the market had enough confidence in long-term bonds, tonight’s data would have pushed the 10-year yield even lower. But we saw the opposite: a rebound.
This means that a 5% long-term yield is attractive to investors, but it only temporarily offsets the pressure from long-term inflation, fiscal concerns, and the term premium. It hasn’t yet given investors enough confidence to keep buying long-term bonds and drive yields lower!
For risk assets, the bond market’s current trajectory is a mixed bag: in the short term, it has paused the drain on capital, but over the medium term, 5% yields are still weighing on risk assets.
With Brent at $116 and WTI at $102 right now, it’s really hard to feel good about things—this is painful!#股票财报季