After rising into late June and early July, the 10-year peaked at 2.38% on solid employment data. Yields fell from that point based on declining year-over-year inflation data and lower energy costs, bottoming out at 2.24%, but holding in a rather tight range during the period. On the month, all Treasury yields fell, with the exception of the 30-year.
During the month, Fed Chair Yellen provided the semiannual testimony to Congress, which appeared to align with recent meeting minutes. The takeaways indicated an inclination to begin allowing the Fed’s balance sheet to decline in a gradual manner starting in late September or October. As a result, no change in interest rates is expected in September, with December being data and market dependent. Near-term drivers of rates include comments at the Jackson Hole Symposium on August 24-26 (could Draghi signal an ECB shift?), and the risk of a government shutdown as we hit the debt ceiling limit. Signals that the Treasury may shift issuance and begin issuing longer maturities could also impact rates in the coming months.