Treasury yields rise as outlook in services sector brightens

Sept. 7:

The ISM Services PMI jumped from 52.7 in July to 54.5 last month, driving Treasury yields up. Any number over 50 indicates an outlook for growth in the national services sector. Increases were seen in all four subindexes that feed into the overall index. 

New unemployment claims continue to fall

Weekly initial jobless claims dropped to 216,000 last week. It’s the lowest level since February, testifying to the continued strength of the labor market. The less volatile four-week moving average now stands at 229,250.

Q2 productivity rose 3.5%

Nonfarm Productivity increased 3.5% in the second quarter. The figure was revised down slightly from the 3.7% previously estimated. Unit labor costs rose 2.2% in Q2, up from the earlier estimate of 1.6%.

Fed reports moderate economic growth in most districts

The Federal Reserve characterized economic growth in most of its 12 districts as moderate in its latest Beige Book. 

State of the market

The jump in the services index helped boost the chance the Fed will tighten interest rates at the Nov. 1 Federal Open Market Committee meeting to more than 50%, per the Fed funds futures market. The chance of any action at the Sept. 20 FOMC meeting is still regarded as negligible.

This morning, the Dow traded up and Treasury yields were up relative to Wednesday morning.

Economic calendar

Friday, Sept. 8

• Consumer Credit

Treasury calendar

There are no auctions of Treasury notes or bonds this week.

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