Weekly Market & Economic News Recap (Week of August 21, 2023)

• Mortgage rates hit 7.23%, highest since 2001. Borrowing costs have risen more than the benchmark Treasury yields they track, pushing up interest rates for buyers. (Wall Street Journal, August 24, 2023, https://www.wsj.com/economy/housing/mortgage-rates-hit-7-23-percent-72688ccd?mod=economy_lead_pos3)

• Powell says Fed will ‘proceed carefully’ on further rate rises. Fed chair notes economy hasn’t cooled as expected, saying more strength could warrant additional action. (Wall Street Journal, August 25, 2023, https://www.wsj.com/economy/central-banking/powell-says-fed-will-proceed-carefully-on-any-further-rate-rises-31b6fc6a?mod=economy_lead_pos1)

• US consumer year-ahead inflation expectations rise on gasoline. Short-term inflation views increased to 3.5% in August. University of Michigan sentiment index declined to 69.5. (Bloomberg, August 25, 2023, https://www.bloomberg.com/news/articles/2023-08-25/us-consumer-year-ahead-inflation-expectations-rise-on-gasoline?srnd=null)

• Treasury market slips, front-end yields rise on hawkish Powell. Powell says bank stands ready to keep hiking if needed. Reinforces speculation that rates on higher-for-longer path. (Bloomberg, August 25, 2023, https://www.bloomberg.com/news/articles/2023-08-25/us-5-year-real-yield-at-highest-since-2008-after-powell-speaks?srnd=null)

• Powell targets high-or-higher rate path as economy picks up. Policy to stay restrictive until inflation firmly headed down. Fed chief indicates strategy shifting toward managing risks. (Bloomberg, August 25, 2023, https://www.bloomberg.com/news/articles/2023-08-25/powell-targets-high-or-higher-rate-path-as-economy-picks-up?srnd=economics-v2)

• Stocks close higher after a bumpy week. A sharp rise Friday helped temper losses from earlier this week, with only the Dow ending the week lower. (Wall Street Journal, August 25, 2023, https://www.wsj.com/finance/stocks/global-stocks-markets-dow-news-08-25-2023-7728332f?mod=stocks_news_article_pos4)

• Employment growth in the world’s largest economy probably cooled and wage increases moderated in August, suggesting a further tempering of inflation risks that reduces the urgency for another Federal Reserve interest-rate hike. (Bloomberg, August 26, 2023, https://www.bloomberg.com/news/articles/2023-08-26/world-economy-latest-slower-us-job-growth-to-support-fed-patience?srnd=economics-v2)

• Swollen government indebtedness and the upward pressure that puts on interest rates is here to stay, according to a paper to be presented to the Federal Reserve’s annual Jackson Hole symposium on Saturday. (Bloomberg, August 26, 2023, https://www.bloomberg.com/news/articles/2023-08-26/bloated-government-debt-is-here-to-stay-jackson-hole-paper?srnd=economics-v2)

• Junkiest debt rallies as investors brush off Fed. CCCs have outperformed investment-grade debt this year. Banks are bringing leveraged finance deals to market. (Bloomberg, August 26, 2023, https://www.bloomberg.com/news/articles/2023-08-26/junkiest-debt-rallies-as-investors-brush-off-fed-credit-weekly?srnd=markets-vp)