Attack the Week (ATW)

August 28, 2023

Monday Thoughts

We are closing in on another month. Jackson Hole, as expected, was a doozy. Powell’s speech on Friday didn’t give any new clues and certainly dismissed any speculation about a change in the inflation target or a discussion about higher R*. As mentioned in last week’s ATW, he did precisely leave all options on the table, which is the most prudent way forward.

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Where does this leave us with regard to Treasuries (US 10-year yields in the below chart)?

Since May, we had about a 100 bps move higher in yields. When looking at sell-off periods over the past 20 years, the current sell-off just ranks below average. We certainly have room to move a bit higher depending on which historical period you see the strongest resemblance with.

Let’s look at the week ahead and some more interesting developments.