Awaiting FOMC members when they arrive for day two of their policy meeting will be today's news of a 0.2% decline in the CPI in August (vs. a forecast 0.1% gain), along with the core rate flatlining (vs. a forecast 0.2% gain). It's first time the core rate hasn't risen on a month-to-month basis in four years. So much for being behind the curve.
On a year-over-year basis, the CPI rose 1.7% vs. 1.9% estimated.
The 10-year Treasury yield slips to 2.56% from 2.59% ahead of the report.
It's taken less than two weeks in September to erase all of the summer's big gains in long-term Treasury prices. Today's five basis point jump in the 10-year yield to 2.60% brings it above the level it was at just after the Memorial Day weekend.
If Europe led yields south during the summer, it's leading them north now, with the German 10-year Bund yield up another five basis points to 1.05% after sinking to below 0.9% two weeks ago. Italian, Spanish, and British yields are sharply higher as well (though all three countries sport 10-year rates lower than the U.S.).
"It's the beginning of the end of the bond market rally," David Tepper tells Bloomberg. "We are done." His comments come after the ECB earlier today cut interest rates and set about launching an asset purchase program.
After dipping to 2.39% in the aftermath of the ECB action and a minor miss in the ADP jobs report, the U.S. 10-year Treasury yield has shot back higher, up five basis points on the session to 2.45%
The German 10-year Bund yield is up one basis point at 0.97%, while Spanish and Italian 10-year yields are sharply lower, with both - Spain at 2.18%, and Italy at 2.35% - comfortably lower than the U.S. 10-year.
A series of strong economic reports (Q2 GDP, jobless claims, home sales) is failing to halt the decline in the 10-year Treasury yield, which slips another four basis points to 2.32%. The German 10-year Bund yield is lower by two basis points to 0.89%.
At issue today is Ukraine's assertion the Russian military has invaded the country. "It's more overt now," says a senior NATO military officer, and NATO reports "well over" 1K Russian troops are inside Ukraine, with another 20K just across the border in Russia.
The 10-year Treasury yield adds another basis point following the FOMC minutes, now ahead 2.5% bps on the session to 2.43%. Looking at a rate more sensitive to Fed policy, the 5-year note yield jumps 4.5 bps to 1.625%.
The minutes show many committee members believing the labor market is improving faster than anticipated across a whole range of indicators, and the time is getting near for when it can no longer be described as underutilized.
Macro concerns trump Fed hawkishness as the 10-year Treasury yield falls another five basis points to 2.37%, its lowest since June of 2013. The yield on the long bond is down four basis points to 3.20%.
In shorter maturities, the 5-year note is down four bps to 1.56%.
A check of Eurodolloar futures finds them higher, but still predicting the first rate hike by next June.
The uptick in unemployment in July came as the labor force participation rate edged up to 62.9% from 62.8%. It was 63.4% a year ago. The employment-to-population ratio of 59% was flat from June, and up from 58.7% a year ago.
The average workweek remained flat for the fifth straight month at 34.5 hours. Average hourly earnings edged higher by a penny to $24.25 - they're up 2% from a year ago.
May's 224K jobs gain was revised higher by 5K jobs and June's 288K was bumped higher by 10K for total upward revisions of 15K.
The broader U-6 unemployment rate rose to 12.2% from 12.1% - a year ago it stood at 13.9%.
The 10-year Treasury yield slips to 2.53% from 2.59% ahead of the report.
The economy grew at a 4% pace in Q2 says the government in its first estimate of that quarter's activity, well past expectations for 3% growth. Still revising Q1's numbers, that quarter's decline of 2.9% was adjusted to a fall of just 2.1%.
On the inflation front, the PCE index - the Fed's preferred price gauge - rose a speedy 2.3% in Q2 vs. 1.4% in Q1. It's the fastest pace since 2011 Q2. Core PCE rose 2%, up from 1.2% in Q1.
The 10-year Treasury yield shoots up five basis points to 2.51%. TLT -0.5%, TBT +1% premarket
The 10-year U.S. Treasury yield is higher by three basis points to 2.50%, with jobless claims falling to an 8-year low winning the day vs. a big miss in June New Home Sales.
Checking rate hike expectations, the December 2016 Eurodollar contract is lower by 5.5 basis points (means expectation of higher rates), and pricing in about 200 basis points of rate hikes between now and then.
Troubles in Portugal have sent the 10-year Treasury yield down to 2.5% - a six-week low even as jobless claims this morning dipped to their smallest level in about 7 years and the Fed begins a more serious discussion of an exit from ZIRP.
The U.S. 5-year yield is off 4.5 basis points to 1.63%.
The yield on Portuguese 10-year paper continues to rise, up another 11 basis points today to 3.91%, and a 2% decline across Europe has brought stocks there to a 2-month low.
Strong employment report and coming Fed rate hikes? Long-term Treasurys have their eye on something else, with the yield on the 10-year note off another four basis points in early action to 2.57%. The yield touched 2.70% in wake of Thursday's fast nonfarm payroll number.
Checking Eurodollar futures for expectations of tighter monetary policy, they've backed off a bit from rate hikes as well, the June 2016 contract ahead by four basis points, but still pricing in a Fed Funds rate about 130 basis points higher in two years then it is now.
The 10-year Treasury yield pops higher by three basis points to 2.59% after ADP reports private job gains of 281K in June vs. 213K expected. May's 179K gain remains so, but earlier months saw a mix of revisions.
The disappointing April durable goods print combines with yet another big revision downward in Q1 GDP to send the 10-year Treasuy yield lower by four basis points to 2.54%. The short end parties as well, with December 2016 Eurodollar futures up 7 basis points to 97.96 (higher Eurodollar futures mean lower rates), still pricing in about 200 bps of rate hikes between now and then.
In addition to the headline miss in durable goods (-1% vs. +0.4% expected), core durable goods fell 0.1% vs. an expected 0.4% gain.
Before doing too much buying or selling on these numbers, do note they're both old news. The durable goods number is from May and GDP is from Q1, and we're about to enter Q3.
The decline in headline unemployment to 6.3% overstates the improvement in the labor market, says Yellen, explaining why the Fed plans on holding rates low even after the rate falls to 5.5%.
At least part of the decline in the rate represents what Yellen calls "shadow unemployment" - discouraged workers who have exited the labor force, but would return if prospects improved.
Markets are starting to take some direction, with the S&P 500 (SPY) now ahead 0.6% and the 10-year Treasury yield sinking four basis points to 2.61%.
Asked an interesting question about whether Fed policy is at odds with itself - with one hand, the Fed wants credit to flow to help boost the economy, but with the other hand is stifling credit with new regulations - Yellen says the boosted oversight is needed to prevent another financial crisis, and from her seat credit is broadly available.
The higher-than-forecast 0.4% rise in the CPI in May (with core CPI +0.3% also ahead of estimates) sends Treasury yields higher, with the 10-year up two basis points to 2.62%. TLT -0.3%, TBT +0.6%. At the short end, Dec. 2016 Eurodollar futures are lower by 4 basis points (thus pricing in a higher Fed Funds rate at that time).
On the flip side, housing starts in May disappointed, slipping 6.5% from April's pace. The annual rate of 1M is still 9.4% ahead of the pace in May 2013. Single-family housing starts in May of 625K were 5.9% lower than April.
Building permits of 991K were 6.4% lower than April and down 1.9% from a year ago.