New claims for unemployment benefits fell to 473,000 from a revised 504,000 last week. While an improvement, a number at these elevated levels signals the labor market continues to be weak and will be an impediment to economic growth.
Many economists are now changing their view of economic growth in the U.S. with some giving the chance of a double-dip recession as high as 40%. Goldman Sachs economists also put out an investment note to customers yesterday saying they believe the recent host of negative headlines will force the Fed into further action before year-end.
The Fed is having its annual symposium in Jackson Hole beginning today. Fed Governor Hoenig put out the first sound-bite this morning saying that he still believes the economy is having a “modest recovery” but that “uncertainty is driving things”. I think you and I probably has this figured out, “uncertainty is driving things”, but it is nice to know a Fed governor concurs.
Treasury auctions $29B 7-year notes this afternoon and the Fed will be buying Treasuries. Yesterday’s auction of 5-year notes was decent with above average bid/cover and better indirect demand than we saw on the 2-year auction. Bond markets will continue to trade with their eyes glued to Jackson Hole and tomorrow’s release of GDP figures.
After a brief rally Wednesday morning, in which the 10 year note traded as low as 2.42%, bonds sold off sharply. As of this writing bond prices are flat to Wednesday’s close, with the yield on the 10 year note sitting at 2.55%.
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