Yields Make Big Moves After Inflation and Jobs Data

This week, we’ve seen a significant rise in jobless claims, reaching the highest level in 4 years, as reported by the Labor Department. This, coupled with the August consumer price index surging by 2.9%, a faster pace than the two previous months, has had a profound effect on the market. These figures have driven the Dow Jones up over 500 points today and pushed bond yields lower, in anticipation of the Federal Reserve’s potential decision to lower its benchmark interest rate next week.

The 10-year Treasury bond yield dropped to 3.99% as I write, dipping closer to the lowest yields since April when they hit 3.86%. The 30-year Treasury dipped to 4.64% from the high in May of 5.09%. ⁽¹⁾

Long municipal bonds, for example, Met Pier IL 4% due 2050, traded as high as 5.33% on 8/1 and yielded 4.89% yesterday. This rate movement is considerable because municipals trade in 1/8 increments, and typically, changes are minor.

The DRL Group, having anticipated these changes for a long time, has consistently advised fixed-income investors against trying to ‘time the market’. As we’ve stressed in our recent blog, waiting can be costly. Despite the market changes and the expectation of several rate cuts this year, yields remain attractive and offer respectable levels, especially when considering some of their taxable equivalents.

For months now, we’ve been reminding our readers to keep in mind that just 5 years ago, the 10-year Treasury closed at .52%; last September it dipped to 3.62%, indicating there’s still room for movement. ⁽²⁾ We do anticipate some volatility along the path, but waiting can be costly.