July 28, 2023
Yesterday’s stronger Q2 GDP print, firmer durable goods orders and lower weekly jobless claims number resulted in higher bond yields. Yesterday’s pullback in stock prices should be attributed to higher US bond yields, rather than a BOJ YCC tweak. The mid-day BOJ headlines attracted a lot of attention but the policy decision isn’t a significant event for US bond yields or equities. Despite yesterday’s backup in yields, aggregate US data continues to support the soft landing narrative with today’s ECI and PCE reports helping to ease inflation concerns. Bond yields still look like they peaked last October, but the peak isn’t as clear as it was back in late-May. Stronger than expected economic data supports a release to higher yields and a break in 10-year yields above ~4.22% would be a bearish development for equity markets. We’re back to looking for evidence of a peak in yields with the July Jobs Report next Friday and July CPI on August 10 as important catalysts for the outlook.