ISM Manufacturing Index Jumps, U.S. Treasury Yields Follow

U.S. Treasury yields went up across the spectrum as the Institute for Supply Management said its manufacturing index jumped to a 14-year high of 61.3% in August, which increased from 58.1% in July.

The benchmark 10-year yield went up to 2.897 while the 30-year yield climbed to 3.062. Short-term yields also edged higher with the 2-year going to 2.657 and the 5-year to 2.772.

“2018 has been a banner year for manufacturing, despite concerns about tariffs and trade barriers that have been ongoing for months. The increases in the prices of various input materials from tariffs and natural inflation pressure hasn’t significantly dampened overall activity. We do not see anything in the data that portends a slowdown,” said Thomas Simons, senior money market economist at Jefferies.

ISM Manufacturing Index Jumps, Treasury Yields FollowNAFTA Trade Concerns Linger

Trade concerns continue to be on the minds of investors, specifically the NAFTA agreement between the United States and Canada. With a soft deadline last Friday, the U.S. and Canada were unable to procure a revamped NAFTA agreement. Canada is seemingly the next shoe to drop after a deal with Mexico was agreed to last week, but U.S. President Donald Trump appears to be in no hurry with Canada, citing that there’s “no political necessity to keep Canada in the new NAFTA deal.”

Things looked promising when Canada’s Foreign Affairs Minister Chrystia Freeland said talks with the U.S. were “constructive” despite the threat of punitive tariffs on Canadian-made cars if Canada spurns the prospect of a new NAFTA deal come Friday. In the meantime, Freeland was effusive in her praise of Mexico’s trade concessions on autos and labor rights on Tuesday as she rejoined NAFTA talks.