Market Awaits August ISM Services Survey

  • Plummeting July factory orders in Germany, and sticky inflation fears egged on by higher oil, have stagflation fears weighing on European equities and our equity futures are trading lower in sympathy. That has lent a risk-off tone to the early trade and that is providing some footing for Treasuries as they try to stem the supply-induced slide from yesterday. Presently, the 10yr Treasury is yielding 4.24%, up 4/32nds in price while the 2yr is yielding 4.95%, up 1/32nd in price.


  • As busy as last week was, this week is light on first-tier data but the one that we do have comes later this morning in the form of the August ISM Services Survey. Recall, the early Treasury rally on Friday after the jobs report was stymied by a slightly better than expected ISM Manufacturing print. Despite still hovering below 50, and indicating continued contraction, it did beat expectations, especially the prices paid sub-index, and that hinted that the recent dis-inflationary impulse from manufacturing may have ended.


  • The services survey is expected to print a 52.5 vs. 52.7 in July. So, a slight weakening is projected but still indicating an expanding sector. Just as in the manufacturing survey the sub-indices like prices paid, employment, and new orders will get attention as the market looks for any signs of weakening in the all-important services sector. Any downside surprise probably adds legs to the early Treasury rally today.


  • In our continuing quest to find a chink in the consumers armor, we came across Citigroup’s latest report on activity in their credit card portfolio. For the 16 sub-sectors they track total spending in September week 1 (ended 9/5) decreased 10.4%, but that is a slight beat vs August week 4 (ended 8/26), which was -11.3%. Ex Food spending was -10.9% in September week 1 vs -12.2% in August week 4. September week 1 spending of -10.4% (-10.9% ex-food) was similar to the month of August overall, which was -10.2% (-10.4% ex-food). August was the weakest month of 2023 and the 4th consecutive month of spending deceleration. Just something to note as the Atlanta Fed continues to see a very strong third quarter GDP print (latest estimate is 5.6%).


  • The Fed will release its Beige Book of economic conditions this afternoon and this will be the basis for the staff economic presentation for the September 20 FOMC meeting. In addition to the Beige Book, we get some Fed Speak today including former Fed member James Bullard. Boston Fed President Susan Collins has already spoken, and this appears to be the money quote, ”this phase of our policy cycle requires patience and holistic data assessment while we stay the course. And while we may be near, or even at, the peak for policy rates, further tightening could be warranted, depending on the incoming data.” That seems to be the standard phrasing of late.

ISM Manufacturing & Services Survey

Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 5.77 5.53 5.47 5.45 5.59 6.05
0.50 5.76 5.50 5.40 5.34 5.44 5.94
1.00 5.75 5.47 5.37 5.30 5.35 5.81
2.00 5.46 5.31 5.22 5.24 NA
3.00 5.17 5.17 NA
4.00 5.13 NA
5.00 5.09 NA
10.00 NA

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Published: 09/06/23 Author: Thomas R. Fitzgerald