Monthly Market Monitor

August 2024

Macro

Financial markets took note of the more balanced tone of the Federal Open Market Committee’s July 31 post-meeting statement, in contrast to the more hawkish undertones of prior statements. Inflation was described as “somewhat” elevated, job gains were described as having “moderated,” and there was an acknowledgment that “the unemployment rate has moved up but remains low.”

The July jobs report was uniformly softer than anticipated; nonfarm payroll growth came in below consensus expectations and the unemployment rate unexpectedly ticked up to 4.3%.

The combined impact of these two releases during the last week of July and beginning of August, resulted in decidedly lower interest rates, with the 2-year U.S. Treasury yield plummeting 50 basis points (bps) for the week.

Credit

Issuance for July was robust, coming in slightly under $120 billion. Supply was driven by the Financials sub-sector as several banks issued debt following their second quarter earnings reports.

While credit spreads were unchanged for the month, the tone has been markedly weaker in the opening days of August, with spreads moving 11 bps wider in just the first two trading days of the month.

Structured

Mortgage-backed securities led all investment grade sectors, with 42 bps of excess returns for the month.

Despite a continuation of heavy supply, the asset-backed securities sector continued to see strong investor demand, which propelled the sector to another month of positive returns.

2/10YR UST Yield Curve, bps | Yield curve close to dis-inverting

2/10YR UST Yield Curve, bps

After reaching a year-to-date high of approximately 50 bps of inversion, the 2/10-yr yield curve has steepened by 40 bps over the last month.
Increased expectations for rate cuts from the Federal Reserve have been one of the primary drivers of the recent steepening.

As of 8/2/2024. Source: Bloomberg L.P.

Market Data

As of 7/31/2024. Source: Bloomberg L.P.

Bloomberg Sector/Index Performance (USD)

As of 7/31/2024. Source: Bloomberg L.P.

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