Last week began fairly quietly leading up to Powell’s speech in Jackson Hole on Friday. Interest rates took a slight step up on Thursday but came down on the week overall. 2-year Swaps were down 15 BPS, and 10-year Swaps were down 8 BPS. A lot of this movement came following Powell’s speech. He suggested that the time has come for policy to adjust, leaving us with near certainty that the Fed will cut rates next month. Barring something drastic and unexpected on the economic data front, we’ll get a 25 basis point cut, and perhaps even 50. The market is currently pricing in 4 cuts this year with a 50/50 shot at a 5th, and 9 total by EOY 2025.
Today Durable Good figures came in solidly. Tomorrow, $69B of 2-year Treasuries will be auctioned off, followed by $70B of 5-year Treasuries on Wednesday and $44B of 7-year notes on Thursday. On Thursday we’ll also get GDP revisions for Q2, which will be significant, followed by the most anticipated release of the week on Friday: PCE. YoY PCE figures are expected to tick up slightly. The Fed has painted itself into a corner of 2% inflation, and the reality is that we aren’t there yet. While all signs point to a September cut, it may be accompanied by a hawkish tone.
