The projection for 2015 GDP growth is cut somewhat, but so is the forecast unemployment rate, now at a range of 5.4-5.6% from 5.4-5.7%. The high end of the core PCE inflation forecast is cut, now 1.6-1.9% from 1.6-2.0%.
11 out of 17 FOMC members now see the Fed Funds rate at above 1% by the end of 2015. Four of the group see Fed Funds at about 4% by the end of 2016.
The bond market is selling off on what could be argued to be a more hawkish lean to the policy statement and projections. The 10-year Treasury yield - at about 2.56% ahead of the release - is up to 2.60% at the moment. TLT +0.35%
More sensitive to short rate, the 3-year yield jumps about 7 basis points to 1.1%.
Janet Yellen's press conference begins at 2:30 ET.
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 almost comical" that experts continue to forecast rising rates, says Jeff Gundlach. The downgrade of GDP forecasts has now become an annual event, yet "hope springs eternal" that 3% growth is just around the corner.
Look no further than housing, says Gundlach, for what's holding the economy back. There's a secular trend at play as demographics continue to force a shift away from home ownership, and the cyclical action of rising home prices will just accelerate this.
Earlier, the MBA reported mortgage application volume fell 7.2% last week, bringing the MBA index to its lowest level since December 2000. Refinance volume fell 11% to its lowest level since Nov. 2008, and purchase volume fell 3% on the week, and 12% from a year ago.
The purchase print is especially troubling, says Diana Olick, as all-cash institutional buyers are moving out of the market, leaving mortgage-dependent buyers to pick up the slack.
The 10-year Treasury yield is higher by two basis points to 2.53%.
U.S. data released today is expected to show steady job growth, rising in August to 225K from 209K in July, and a slight drop in the unemployment rate to 6.1% from 6.2%.
Adding to the ECB's move for a new securities purchase program and cutting its key rates, highlighting an improved labor market will spur debate as to whether the Fed will step back from its commitment to keep rates low for a "considerable period" or hang on to its current policy due to a weak global economy.
"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.
The 10-year U.S. Treasury yield slips to 2.39% from 2.42% following the slight miss in the ADP jobs number, with gains of 204K vs. expectations of 220K. In addition, July's 218K job gain was revised lower by 6K.
Earlier, the ECB cut rates by 10 basis points across the board.
First, says the team, the economy has improved and economic data has been beating expectations. The bank's Economic Data Surprise Index has risen substantially from its lows and now stands at its highest level since May.
Second is valuation, with Treasury yields at their lowest point of the year.
Third is the tendency for Treasury yields to rise during the week of the nonfarm payrolls report.
Fourth - yields also tend to rise in the weeks leading up to FOMC meetings which also include economic projections and a press conference (next meeting is Sept. 16-17).
Unfortunately, much of the "tactical" move may have already been missed as the 10-year yield has shot up eight basis points today to 2.42%
New Orders of 66.7 is a 3.3 point rise from July's level, and the highest read for that subindex since April 2004. Production of 64.5 also rises 3.3 points in August.
Employment 58.1 vs. 58.2; Supplier Deliveries 53.9 vs. 54.1; Inventories 52 vs. 48.5; Prices 58 vs. 59.5; Backlogs 52.5 vs. 49.5.
"Business is strong. Labor is becoming a difficult issue," says a respondent in the Furniture & Related Products industry. From a respondent in Primary Metals: "Strongest month in years. Business is solid...Awesome!"
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 is lower again today - off two basis points at 2.39% - but for an explanation, it's perhaps best to look across the pond where the 10year German Bund slid all the way to 0.94% amid Mario Draghi's promise of more monetary ease and a disappointing Ifo survey.
Janney chief fixed-income strategist Guy LeBas notes the very high correlation on the long end between Treasurys and Bunds of late. While correlations will fluctuate, these patterns can last for several months, so as long as German yields stay under pressure, there's a "decent probability" U.S. ones will as well.
"The European interest rate markets are telling us that, one, there’s a very high probability of low inflation or deflation that will last for years to come, and two, that the ECB will be essentially impotent in generating enough inflation to break the eurozone out of this current spiral."
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.
Unless he's talking about hitting 2.2% today, it's not such an outlandish prediction given the big rally in Treasury prices of late. On the session, the 10-year yield is lower by a full seven basis points to 2.33%.
As for 2%, Gundlach - speaking on a CNBC interview - doesn't think we'll get there, but momentum is a hard thing to judge, and there's plenty pushing yields lower right now.
Initial jobless claims rising 21K to 311K makes for a good excuse for headline writers, but action elsewhere may be of more import as German 10-year Bund yields slipped below 1% for the first time ever amid stalled EU Q2 GDP growth. The Bund yield has since popped back to 1.01%, off two basis points on the day.
The U.S. 10-year yield is currently down three basis points to just under 2.40%, its lowest on a closing basis since June 2013. Up later, Treasury will sell $16B of 30-year bonds.
: The decay is not bad, relative to the yield. So, it is less than equity triple inverse ETFs, but not relative to the yield over decades.
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