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After disappointing 30-year Treasury bond auction results last week, longer-term interest rates are quickly approaching their highest levels in over a decade.1 The recent increase in long-term rates comes despite improving news on the inflation front and expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle.
With two of the largest buyers of government bonds — the Fed and U.S. banks — now on the sidelines, finding new buyers for fast-accelerating Treasury bond issuance may prove challenging. Even though fiscal discipline seems unlikely in Washington with a presidential election next year, the bond market may again be in a position to, in the words of Clinton aide James Carville, “intimidate everybody.”2
This week’s economic calendar is highlighted by Tuesday’s U.S. retail sales report which will give another gauge on the state of the U.S. consumer.3 Minutes from the Fed’s July meeting will be released Wednesday afternoon. Investors will be looking for clues about the potential for another rate hike during the upcoming September meeting.
Sources:
1Yahoo! Finance – US 30-Year Treasury Auction Signals Weak Demand to Wrap Up Week of Big Sales; 8/10/23
2The Washington Post – Look Out America, Here Come the Bond Vigilantes; 3/13/23
3MarketWatch – U.S. Economic Calendar; as of 8/14/2023
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