Treasury yields fell in conjunction with consumer sentiment as the University of Michigan’s consumer sentiment index hit 95.3 for the month of August, which represents its lowest level since September. This fell short of economists’ forecasts that the index would hit 98.
The benchmark 10-year yield fell to 2.86 and the 30-year to 3.014, while the 5-year yield dropped to 2.74 and the 2-year settled at 2.616 as of 12:50 a.m.
“Overall, the data indicate that consumers have little tolerance for overshooting inflation targets, and to the benefit of the Fed, interest rates now play a more decisive role in purchase decisions,” said Richard Curtin, chief economist of the University of Michigan’s Surveys of Consumers. “As is usual at this stage in the business cycle, some price resistance has been neutralized by rising wages, although the falloff in favorable price perceptions has been much larger than ever before recorded.”
Related: Turkey Crisis Evokes Risk-Off Sentiment for Investors
Turkey Contagion Easing
The U.S. capital markets did take a breather today with the major indexes moving little as Turkey contagion began to ease–the Dow Jones Industrial Average was over 50 points, the Nasdaq Composite was down 25 points and the S&P 500 climbed just over a point.
Low interest rate levels, high inflation and geopolitical tensions have been weighing heavily on Turkey’s economy, which have had ripple effects in the capital markets this week. In addition, U.S.President Donald Trump imposed sanctions on Turkey’s interior and justice ministers just last week for their role in the internment of U.S. pastor Andrew Brunson as well as other Americans for terrorism.
Turkey is also feeling the pangs of President Donald Trump’s decision to impose tariffs of 25% on imported steel and 10% on imported aluminum–President Trump doubled down on the tariffs with the announcement that tariffs would be hiked to 50% and 20%.. Turkey is threatening to hit the U.S. with its own wave of tariffs on cotton – a staple input for Turkey’s high-exporting garment industry.
For more trends in fixed income, visit the Rising Rates Channel.