Treasury yields down in a flight to quality amid Middle East conflict

Oct. 20:

Worries over the crisis in the Middle East caused a flight to quality ahead of the weekend. This morning, the Dow traded down and Treasury yields were down relative to Thursday morning.

Home sales fell 2% last month

Existing home sales fell 2% in September. Sales were up in the Northeast but down in all other regions.

Leading Indicators index continues to drop

The index of Leading Indicators, which has been falling since April 2022, dropped 0.7% in September. The index’s decline continues to signal economic weakness.

Powell: Fed ‘proceeding carefully’ on inflation

Federal Reserve Chair Jerome Powell caused a temporary stir yesterday when he said the Fed would be “proceeding carefully” during an address to the Economic Club of New York. But the moment passed when it became clear the Fed remains concerned over the level of inflation and is keeping the door open to taking further action to contain it.  

GDP, key inflation index highlight next week’s calendar

Next week’s calendar includes the first look at Gross Domestic Product for Q3, as well as durable goods and the Personal Consumption Expenditures price index. There will also be $167 billion in Treasury note auctions.

Economic calendar

Tuesday, Oct. 24

• S&P Global Flash U.S. Composite PMI

Wednesday, Oct. 25

• New Home Sales

Thursday, Oct. 26

• Advance Durable Goods
• Q3 Gross Domestic Product
• Weekly Initial Jobless Claims
• Pending Home Sales

Friday, Oct. 27

• Personal Consumption Expenditures Price Index
• Personal Income/Personal Spending

Treasury calendar

Thursday, Oct. 19

• Yesterday’s auction of $22 billion in five-year Treasury Inflation-Protected Securities (TIPS) resulted in a yield of 2.44%, with demand lower than at the previous such auction. The difference between five-year Treasuries and five-year TIPS reveals market expectations of where the Consumer Price Index may be, on average, over the next five years. This morning, that difference indicated an implied average CPI growth rate of 2.49%, considerably higher than the 2.15% rate priced in earlier this month.  

Tuesday, Oct. 24

• $51 billion auction of five-year Treasury notes

Wednesday, Oct. 25

• $52 billion auction of five-year Treasury notes
• $26 billion auction of two-year Floating Rate Notes

Thursday, Oct. 26

• $38 billion auction of seven-year Treasury notes

By Mike Kraft, Executive Director and Commercial Real Estate Treasurer for Commercial Banking