US Manufacturing PMI Surges to 55.6, Bond Yields Spike on Fed Credibility Concerns

US manufacturing hits four-year high at 55.6, triggering bond sell-off as BofA warns of Fed credibility gap regarding inflation path.

Woofun AI reports that the U.S. manufacturing PMI climbed to 55.6 in July, marking the highest level since 2022 amid recovery in production and employment.

Concurrently, U.S. Treasury markets experienced sharp turbulence, with long-dated yields briefly approaching two-decade highs due to geopolitical inflation fears and strong demand.

Mark Cabana, Head of U.S. Rates Strategy at Bank of America, characterized the volatility as a "textbook inflation credibility shock." He attributed the turmoil to the Federal Reserve's inadequate policy communication, specifically citing Fed Chair Kevin Warsh's failure to outline a clear path to the 2% inflation target during a recent press conference. Cabana stated that without a specific roadmap, investors reject the Fed's stance, noting that the bond market sees through superficial appearances.