• Treasury yields are higher this morning but off the highs of the day as today’s inflation numbers came in better-than-expected (more on that below). The market is awaiting the keynote address by Fed Chair Powell at Jackson Hole, due at 10am ET. Once we get past that event, and unless Powell is exceedingly more hawkish than expected, we could possibly see some bids returning to the market.


  • The last major piece of economic information before Jackson Hole is out this morning and July personal spending disappointed against expectations rising just 0.1% vs. the 0.5% forecast and was off against June spending which was revised slightly lower from 1.1% to 1.0%. Adjusted for inflation, however, spending rose 0.2% vs. 0.4% expected but was slightly better than the 0.0% June reading.


  • That tepid spending came against an increase in income of just 0.2% vs. 0.6% expected and June’s 0.7% increase. That headline income number is a tad misleading as wages and salaries rose 0.8% vs. 0.6% in June and 10% YoY. It was farm and rental income that disappointed and dragged the overall number lower.  Thus, rank and file workers continue to see healthy pay increases which should bolster future spending.


  • The personal savings rate has been dropping this year but with the slowdown in spending the savings rate stayed at 5.0% for the second straight month, but that still represents the lowest savings rate since 2009.


  • For now, the most important numbers in the report are the PCE inflation series, the Fed’s preferred measure. The PCE deflator fell -0.1% for the month, beating the 0.0% expectation, and well below the 1.0% rate in June. The year-over-year rate fell to 6.3% vs. 6.8% in June.


  • The core PCE deflator (ex-food and energy) rose 0.1% vs 0.2% expected and well below the 0.6% rate in June. The year-over-year rate dipped to 4.6% vs 4.8% in June. The 4.6% rate beat the 4.7% expectation and is the lowest core PCE since October 2021. So, good news on inflation and it’s ammunition for the September 50bps rate-hiking crowd.

Core PCE (YoY)

Source: Bloomberg


Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 3.40 3.46 3.43 3.47 3.60 4.05
0.50 3.39 3.42 3.37 3.36 3.45 3.94
1.00 3.38 3.39 3.34 3.32 3.36 3.81
2.00 3.39 3.28 3.24 3.24 NA
3.00 3.20 3.18 NA
4.00 3.13 NA
5.00 3.11 NA
10.00 NA

Securities offered through the SouthState | DuncanWilliams 1) are not FDIC insured, 2) not guaranteed by any bank, and 3) may lose value including a possible loss of principal invested. SouthState | DuncanWilliams does not provide legal or tax advice. Recipients should consult with their own legal or tax professionals prior to making any decision with a legal or tax consequence. The information contained in the summary was obtained from various sources that SouthState | DuncanWilliams believes to be reliable, but we do not guarantee its accuracy or completeness. The information contained in the summary speaks only to the dates shown and is subject to change with notice. This summary is for informational purposes only and is not intended to provide a recommendation with respect to any security. In addition, this summary does not take into account the financial position or investment objectives of any specific investor. This is not an offer to sell or buy any securities product, nor should it be construed as investment advice or investment recommendations.

Published: 08/26/22 Author: Thomas R. Fitzgerald