US Markets Return with Hopes of Goldilocks Scenario Amid Elevated Long-End Yields

Today's events and market view

Today the US markets return from their Labor Day holiday. Hopes of a possible goldilocks scenario - a cooling labour market bringing the Fed closer to target without necessitating any further hikes while, at the same time, growth remaining resilient enough to avoid recession - could keep long end yields elevated in the 4 to 4.25% range for now, with a busy primary market adding to the upward pressure. Such hopes remain sensitive to data, though with a particular focus this week on the ISM services tomorrow. Today we will get US factory orders.

Issuance is likely to keep some upside pressure on longer EUR rates, too,  with also long-dated government bond auctions slated for later this week. The key focus is the looming ECB meeting and the possibility of another rate hike. We think the decision is a closer call than the market's pricing of a 25% probability currently suggests. We will get more ECB comments and data to sharpen our views: The ECB consumer expectations survey is released today and we will also get Eurozone producer prices. Services PMIs from Spain and Italy will be released alongside the final European services and composite readings.

No government bond auctions are scheduled for today, but it is worth highlighting that Belgium also lowered its long term bond issuance target yesterday in light of the notable €22bn issued via a 1Y retail bond.