9/8 - Weekly Economic Highlights

This holiday-shortened week saw heavy corporate bond issuance as bond market participants returned from the Labor Day weekend. September is traditionally a busy month for the new issue market, however total investment grade corporate bond issuance is down about 6% year-to-date versus 2022.

The Institute for Supply Management’s Services Index jumped to 54.5 for August, exceeding analysts’ expectations calling for about 52.5 as well as July’s print of 52.7. The surge in spending on concerts and movies (i.e. Taylor Swift, Beyoncé and “Barbenheimer”) helped fuel the rise. Readings above 50 indicate economic expansion, while below 50 signals a decline. August was the eighth consecutive month in expansion territory, and the service sector normally comprises upwards of three-quarters of the US economy. The uptick in New Orders to 57.5 from a buildup in inventories ahead of the holiday season could prove to be a drag for the remainder of the year if corresponding demand doesn’t materialize. Many of the survey respondents reported a slowdown from last year but overall good conditions for the month.

West Texas Intermediate (WTI) crude oil prices bounced to over $87 per barrel this week as OPEC+ members Saudi Arabia and Russia announced they would extend production cuts through year-end. Saudi Arabia has cut its individual production by 1 million barrels per day (bpd) to support prices on concerns about a global economic slowdown. Higher gasoline and jet fuel prices will be a headwind for the US economy.

Bond yields rose this week on the additional corporate bond volume and positive ISM data; the 2-year US Treasury yield was up about 0.10% to 4.98% and the 10-year Treasury yield increased to 4.25% as of this writing. Next week, market participants and the Federal Reserve will be closely watching the results of Wednesday’s Consumer Price Index (CPI) release for August, Advance Retail Sales, and the United Auto Worker (UAW) labor negotiations with auto manufacturers.

Consumer Price Index (CPI), Retail Sales, Producer Price Index (PPI), Empire Manufacturing, Industrial Production, University of Michigan Sentiment Index

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© 2023 Chandler Asset Management, Inc. An Independent Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and the US Department of Labor. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.