U.S. employment cost index surged 0.7% in Q2 U.S. employment cost index surged 0.7% in Q2 after a 0.3% gain in Q1. Wages and salaries increased 0.6%, versus the prior 0.3%. Both of those Q2 gains were the largest since Q3 2008. Benefit costs climbed 1.0% versus Q1's 0.4%. Overall, wage gains have been modest for the past several years, thanks to the weakness in the labor market, and that's been a problem for the FOMC. The surge in ECI and pick up in wages will add to the markets' fears of Fed rate hikes sooner than priced in.
Fed funds opened at 0.06% as the month comes to a close Fed funds opened at 0.06% as the month comes to a close. Yesterday's rate ranged from 0.05% to 0.3125% with a 0.09% effective. Look for an increase in volatility on month-end. The current 3-year note trades with the lowest rate in the repo market at -0.60% following this week's supply.
Oil Action: NYMEX crude is down 67 cents Oil Action: NYMEX crude is down 67 cents at $99.60/bbl, as OPEC production and the dollar strengthens, and as U.S. demand remains relatively soft. The contract sound support ahead of $99.00, before rallying to current levels. Sources expect fund offers to materialize into the $100 mark.