increase in US yields as 10-year

There will be an important lack of liquidity over the second half of August with the peak holiday season

acting to dampen trade volumes. There will also be an important mood of cautions ahead of key political

and economic events during September which will potentially shape events for the rest of 2013. 

There will, therefore, be major caution and the potential for even more erratic market moves in the short term. The latest US labour-market data was again stronger than expected with a decline in initial jobless claims to 320,000 in the latest reporting week from a revised 335,000 previously and this put claims at the

lowest level since late 2007 and there was also a solid reading for the New York Empire index. 

There was  an increase in US yields as 10-year bond yields spiked higher following the data and the 30-year yield

moved to the highest level since the fourth quarter of 2011 at just above 3.80%.

As far as inflation is concerned, headline and core consumer prices both rose 0.2% for July which was in

line with expectations. Regional Fed President Bullard stated that there had been an improvement in the

labour market. He was still concerned that growth rates were disappointing while low inflation could also

still be a problem. In this context, he was undecided whether to back a tapering of quantitative easing at

the September FOMC meeting. The Philly Fed index was slightly weaker than expected which dampened

optimism to some extent and the industrial output data was weaker.