Summary
- The surprisingly weak jobs report for July takes some of the near-term pressure off the Federal Reserve to lower rates to tame inflation. But it’s unclear if the bond market is set to unwind the yield premium that has accrued over the past four and a half months.
- Inflation and pinched energy exports due to the war are key drivers behind the rise in yields, but there are other factors that could keep the bond market wary in the weeks and months ahead.
- Negotiations with Iran will likely remain a crucial variable for market sentiment. Rising Treasury yields, in sum, could act as a brake on the stock market’s revived confidence until it’s clear that a durable peace deal has been hammered out.
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Last week’s stock market surge sends a message that all is well, but that’s only half a loaf until the bond market confirms the recovery in expectations.
Treasury yields eased last week, although rates remain elevated
