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August 20, 2019

Equities End Winning Streak, Rates Fall Ahead of Fed Minutes

 

US equities end winning streak as rates fall lower once more. US equities fell for the first time in four days, following European and Asian equities lower. The move comes as investors digest the prospect of fiscal stimulus from Germany and potentially even the United States, and as Italian assets come under pressure after Prime Minster Giuseppe Conte announced his resignation. The S&P 500 ultimately closed lower by 0.79% while Treasurys rose yet again, the 10 year yield falling 5 basis points to 1.55%. Markets will now turn their attention to tomorrow’s Fed...

August 19, 2019

Rates and Equities Rise Amid Optimism Around Trade Talks

 

Treasury yields rise 6+ basis points across the curve as busy Fed week kicks off. Treasurys gave back some of last week’s significant gains today, yields and swap rates rising 6 basis points across the curve. The spread between 2 year and 10 year Treasury yields has also widened out since last week’s momentary inversion- now sitting at 6 basis points. This week will be an important one following the volatility of the past two weeks, with the always important FOMC minutes being released on Wednesday and the kicking off of the Jackson Hole Economic Symposium later...

August 15, 2019

30 Year Yield Sets Record Low Amid Heightened Concerns Around Trade

 

30 year Treasury yield falls below 2% for the first time. Treasurys resumed their rally today, yields plummeting across the curve as bonds once more benefited from a flight to quality. 30 year Treasury yields fell to 1.97%, the first time they’ve ever fallen below 2%. The move came despite better than expected retail sales figures and a positive outlook from Walmart- easing concerns about the US consumer. Despite the continued strength in the economy’s fundamentals, Fed Funds futures now imply a 66% likelihood of at least three more Fed rate cuts by the end of the...

August 14, 2019

Yield Curve Briefly Inverts as Data Shows Slowing Growth in Europe, Asia

 

US yield curve inverts briefly, sparking recession fears. Rates fell dramatically across the curve in response to weak economic data in Europe, 10 year bonds outpacing 2 year Treasurys to push the 2’s-10’s spread briefly into negative territory. The spread ended the day in positive territory, but only just at 0.002%. The spread is an often cited harbinger of recession- even President Trump expressed concern, criticizing “clueless Jay Powell and the Federal Reserve” for the “CRAZY INVERTED YIELD CURVE.” The inversion comes despite relatively strong fundamentals in...

August 13, 2019

Yield Curve Nears Inversion, Risk Assets Rally as Tariffs are Delayed

 

Consumer Price Index shows unexpected acceleration in July, signaling inflation may be strengthening as the Fed considers additional rate cuts. Core CPI rose 0.3% month over month, 2.2% on an annualized basis. Headline CPI rose at a 1.8% annualized rate, also beating estimates. Slowing inflation has been the Fed’s primary justification for cutting rates amid all-time lows in unemployment, and should other inflation metrics show acceleration it will be increasingly difficult for the FOMC to cut rates in September. Nonetheless, Fed funds futures still price in a 100...

August 7, 2019

Swap Rates End Volatile Session Flat, Equities Mixed

 

 

Treasury yields and swap rates recover to finish higher on the day after being down 10+ basis points. Treasurys initially rallied in response to surprise rate cuts in Asia and a steep fall in German industrial production. However, the risk-off bid petered out following a weak Treasury auction in the middle of the day, and Treasurys would ultimately close lower, yields rising 2-4 basis points across the curve. The story was the same in swap rates, 10 year swap rates at one point falling 13 basis points before climbing back to finish virtually flat on the...

August 6, 2019

US Stocks Bounce Back, Rates Mixed as Trade Tensions Abate Slightly

 

Former Fed Chairs Volcker, Greenspan, Bernanke and Yellen pen op-ed calling for Fed independence. The article, published in the Wall Street Journal, outlined the need for the Federal Reserve to remain data-dependent and to act free of short-term political pressure. The piece also outlined the risks of a politicized Fed, saying that “even the perception that monetary-policy decision are politically motivated… can undermine public confidence…and lead to unstable financial markets and worse economic outcomes.” The op-ed comes as markets have begun to speculate...

August 5, 2019

Rates Tumble 13+ Bps, Stocks Suffer Worst Day in 2019 as Trade Tensions Escalate

 

U.S. equities tumble nearly 3% as China devalues currency, further escalating trade war. The Dow Jones Industrial Average and S&P 500 both fell nearly 3% after the Chinese Yuan breached a key level of 7 CNY/USD to start the trading day. The People’s Bank of China had previously defended this level, and the Chinese currency ended the day at 7.032 CNY/USD, leading President Trump to label the price move as “currency manipulation.” The escalation in already strained trade relations triggered a massive sell-off in US equities and a big spike up in the VIX or “Fear...

August 1, 2019

New Tariff Tweet Sends Rates and Stocks Tumbling

 

Trump tweet on new tariffs sends markets into tailspin. President Trump’s tweet that the U.S. will levy a new 10% tariff on an additional $300 billion of Chinese goods sent markets into a frenzy only a day after the Fed surprised markets with its relative hawkishness. President Trump appeared to try and soften the tariff, characterizing it as “small” and that talks earlier this week were “constructive.” Nonetheless, U.S. equities were whipsawed by the surprise announcement. The S&P 500 and Dow Jones Industrial Average gave back earlier gains of 1% to close...

July 31, 2019

Yield Curve Flattens as Fed Cuts Rates 25 Basis Points, Disappoints on Guidance

 

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