Higher for longer

The U.S. economy is clearly not slowing down.

The September flash Composite PMI jumped to 58.4, its strongest level since July 2021. Manufacturing came in at 57.0 versus 54.0 expected, Services at 58.7 versus 55.8. Every number beat expectations.

Good news for growth, less so for bonds.

The market repriced the interest-rate path following yesterday’s release. The 2-year Treasury yield stands at 4.89%, while the 10-year moved above 5% to 5.11%, approaching levels last seen in 2007.

The message is simple: as long as economic activity remains this strong, the Fed has little reason to rush towards easier monetary policy. “Higher for longer” is back on the table.

Sometimes strong economic data is not necessarily good news for financial markets.