The preliminary composite PMI for US manufacturing and services in September rose to 58.4, the highest in 62 months since July 2021 and above the 56.0 reading in August, driven by new orders surging to 58.2, the highest since March 2022, from 55.2 in August. Outstanding orders rose to their highest level since May 2022, reflecting strong demand and tightening capacity. Supply pressures passed through clearly into costs, with the input price index rising to 66.4 from 59.9 in August, the highest since October 2022. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the rise in outstanding orders reflects companies' increased pricing power, which is worrying for the inflation outlook, while Austan Goolsbee, president of the Chicago Fed, said supply-side effects are likely to persist and strong demand is compounding the inflation problem. After the Fed recently raised interest rates to a range of 3.75%-4.00%, investors increased their bets that the Fed may need to keep policy tight for longer than previously estimated, intensifying selling of US Treasuries, with the 5-year bond yield topping 5% for the first time since 2007 after the results of a 70 billion dollar bond auction came in weaker than expected, with the yield at 5.033%, more than 3 basis points above what the market had expected before the auction. The 10-year bond yield rose nearly 17 basis points to 5.13%, the highest since 2007, and is on track for a seventh straight monthly increase, which would match the longest rising streak since 2011. The 30-year bond yield was at 5.4%, the highest since 2007 and just 4 basis points from its highest level since 2004. The bond market move also spread globally, with Australia's 3-year bond yield rising back to its highest since 2011 and New Zealand's 10-year bond yield climbing to a level last seen in late 2023.
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