US macro conditions show weakening employment, elevated yields (10Y at 4.69%), modest M2 expansion (5.5% YoY), and falling dollar strength, creating mixed signals for risk assets and highlighting fiscal-monetary tension.
Macro & Markets ·
US monetary conditions are displaying mixed signals as of early August. The effective federal funds rate stood at 3.63% on August 6, while the 10-year Treasury yield reached 4.69%—up 47 basis points year-over-year—suggesting sustained pressure on longer-duration assets. Meanwhile, M2 expanded to $23.16 trillion in June, representing 5.5% growth annually, and June inflation measured 3.46% year-over-year. The dollar index weakened 0.8% in the week ending July 31 and 1.7% over the past year.
This combination of rising yields, moderate money supply growth, and persistent price pressures coexists with deteriorating employment data, creating internal inconsistency in the macroeconomic picture. The narrative around artificial intelligence spending continues to support risk appetite despite these headwinds, though some observers frame the current build-out of data center infrastructure as a credit cycle rather than a durable technology story—raising concerns about financial leverage concentrated in AI-adjacent lending.
The immediate focus turns to upcoming US inflation releases and their effect on Federal Reserve rate expectations, Treasury yield trajectory, and the stability of leveraged positions in both credit markets and equities dependent on sustained multiples expansion. Mortgage stress, private credit conditions, and energy price movements in the coming week may test whether the market can sustain its current risk posture amid tightening financial conditions.