Good Thursday AM from your Hometown Lender,

Today is the only day of the week with any economic reports that are relevant to bond market movement. The results are in, and bonds aren’t thrilled. Jobless Claims and the Philly Fed headline helped initially. Yields moved back to unchanged levels after some overnight weakness, but the higher inflation component in Philly Fed was already making for second thoughts before the 9:45am S&P PMI data added fuel to the unfriendly reversal.

In addition to Manufacturing PMI surging higher, the bigger story is the reported tariff-driven price increases:

“Tariffs were reported as the key driver of further cost increases in August. Companies reported the steepest rise in input prices since May and the second-largest increase since January 2023. The manufacturing cost rise was especially large, being the second-steepest since August 2022, the service sector increase was the second-highest since June 2023.” Bonds moved to their weakest levels of the morning after that data.

So rates are a bit worse this morning than yesterday.

Reprice risk though today is low, Bonds have managed to avoid any big losses the last couple of weeks, but could see bigger movement tomorrow when Fed Chair Jerome Powell talks from Jackson Hole. Kansas City Fed president Jeffrey Schmid at the Jackson Hole Symposium expressed doubt about lowering rates in September saying policymakers still have more work to do on inflation Doubts about a September quarter-point Fed rate cut continue to grow, with markets now down to less than 80% probability . That’s a far cry from immediately after the labor data a few weeks ago when traders started to bet on a half-point cut. Fingers crossed we see some buying heading into the afternoon, and we get some follow through after Powell’s speech tomorrow.

Caution, if Powell is hawkish tomorrow, rates will worsen quickly.

In more drama at the Fed, President Trump told aides he is considering firing Fed governor Lisa Cook if she doesn’t resign over accusations of mortgage fraud. Cook said she has “no intention of being bullied to step down…because of some questions raised in a tweet.” We will see. Occupancy fraud is mortgage fraud.

Stay safe and make today great!!