Longer-dated yields continued to grind lower this week as US equity markets fell back to year-end 2019 levels. An attempt on Friday to restart stimulus negotiations seemed ill-fated as the hurdles to pass legislation before the November elections seem insurmountable as the parties remain far apart on the potential size and contents of another stimulus bill. Most economists had included additional stimulus in their base case economic forecasts, so the lack of progress there will likely lead to downward estimates to the economy's pace of recovery.
The week's economic releases were mixed, as the labor market demonstrated continued weakness with weekly initial jobless claims rising and continuing claims falling less than expected. Business spending for August was fairly robust as capital goods orders (ex transportation) have recovered to pre-pandemic levels. However, weak corporate profits may prove to be a headwind as negative earnings trends generally lead declines in business investment.