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Yields Rise Despite Trade, Manufacturing Weakness

Bond markets ended this holiday-shortened week with yields on the upswing following four trading sessions which saw Treasury bond yields traverse a 15 basis point range.  Yields opened on the soft side as continued concerns about U.S.-China trade negotiations and weakness in US manufacturing drove trade flows.  Tuesday's ISM manufacturing survey sank below 50 into contraction territory, as economic anxiety relating to the trade tensions is negatively impacting business confidence.  However, Thursday's factory orders release was stronger than expected, countering the ISM pessimism and lifting yields. 

Friday brought the monthly payrolls report and comments from Fed Chair Powell.  The jobs report was weaker than forecast, as only 130,000 jobs were created in August.  Despite that, the unemployment rate was steady at 3.7% while hourly earnings rose faster than expected.  Powell's comments buoyed markets further, reinforcing markets' expectations for a rate cut in two weeks.

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