Equity markets dominated the news in October, with a broad-based sell-off and high volatility through most of the month, despite generally positive earnings reports. Treasury bond prices broke the pattern of responding positively to poor equity performance. Instead, yields rose significantly early in the month. The 10-year touched 3.23% before later retreating and closing the period at 3.15%. The 2- to 10-year and 2- to 30-year yield curve slope ended the month slightly steeper, a change from the now long-standing trend of curve flattening.
There appeared to be a shift in market psychology regarding the Federal Reserve’s neutral or terminal rate, perhaps provoked (in part) by Fed Chairman Powell’s comments about potentially raising rates past neutral. Economic data continued to reaffirm strength in the domestic economy. While inflation data remained benign, wage growth finally showed signs of life. Oil price increases are a concern as well.