Weekly Market Commentary October 13, 2025
Week in Review
The ongoing government shutdown has created a data vacuum, delaying key economic reports and clouding visibility for the Federal Reserve ahead of its next meeting. Markets now face the unenviable task of interpreting policy direction with limited official data, relying instead on supplemental and tangential indicators to gauge the economy’s trajectory.
The latest Federal Open Market Committee (FOMC) minutes offered context for the recent 25-basis point rate cut, citing a shift in the balance of risks. Policymakers noted rising downside risks to employment and fading upside risks to inflation. This suggests that concerns over a softening labor market now outweigh fears of accelerating inflation, signaling a greater willingness to move rates toward neutral if conditions deteriorate.
In the absence of federal data, markets turned to alternative reports. One of the more notable was the Consumer Credit Report, which came in well below consensus, hinting at stronger consumer balance sheets, with consumers paying down debt rather than increasing leverage. However, this data is often revised, so markets will take it with a grain of salt. Inflation signals remain mixed: the University of Michigan survey showed gradually declining expectations for both the one- and five-year periods, while the New York Fed’s consumer survey reported a modest increase in short-term expectations. Markets must contend with this ambiguity amid a backdrop of limited data.
Treasury auctions for 3-, 10-, and 30-year bonds cleared at higher yields than last month, signaling a broad upward shift in the curve. This appears driven by rising real rate expectations and a higher term premium, rather than inflation fears. The 10-Year Breakeven Inflation Rate held steady around 2.30% –2.35%, suggesting investors are demanding more compensation for duration risk amid “higher for longer” policy expectations and fiscal concerns.
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