Cheap money era ends, forcing investor strategy shift
Bond yields hit multi-decade highs, signalling the end of cheap money and forcing investors to demand higher returns.
US factory orders increased 0.1% in August, matching expectations. Durable goods orders were revised slightly lower, while core capital goods orders held at…
August factory orders climbed 0.1%, meeting the consensus forecast and decelerating from a 0.9% advance in July, per the data release. Excluding transportation, orders rose 0.3%, compared with 0.6% in the prior month.
Revisions to durable goods were slightly weaker. Total orders were adjusted to a 0.1% drop, and orders excluding transportation were cut to a 0.2% rise. But the key indicator for business investment – nondefense capital goods orders excluding aircraft – maintained its 1.6% advance. That stands out as a brighter spot in an otherwise muted headline.
In a rapid assessment, the headline figure matched forecasts, offering traders no major shock. The deceleration in total orders and the downward revisions to durable goods point to weaker manufacturing activity, yet the robust gain in core capital goods offers some counterbalance. On its own, the data gives little impetus to alter views on the Fed’s next move or the trajectory of the dollar and bond yields.
The report from the Census Bureau measures the monthly, seasonally adjusted dollar value of new orders for manufactured goods, covering both durable and nondurable items. Market participants watch order data for signals on future output, while the ex-defense and aircraft capital goods measure is used to assess business spending on equipment.
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Bond yields hit multi-decade highs, signalling the end of cheap money and forcing investors to demand higher returns.
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