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January 3, 2020

Political Instability in the Middle East Causes Flight to Safety for Investors

 

Safe haven assets rally after U.S. airstrike raises Middle East tensions.The uptick in tensions comes on the heels of yesterday’s record-setting day in US equities that saw the S&P 500 hit. The American airstrike killed a top Iran general, Qassem Soleimani, raising concerns that Iran may retaliate with terrorism or by renewing attacks on oil tankers. The yield on the 10-year Treasury fell the most in three weeks as a result, plummeting to 1.83%. Elsewhere, crude oil prices gained as much as 4.2% on the news...

January 2, 2020

Treasurys and Stocks Rally on First Trading Day of 2020

 

Treasurys and stocks rally to start first session of the year. Treasurys are higher across the curve to start the day, Treasury yields and swap rates falling 2-5 basis points across the curve as a result. Stocks are also higher, the S&P 500 and the Dow Jones Industrial Average both climbing 0.56% and 0.48% respectively. The strong start comes after a stellar 2019 across both bonds and stocks that saw the S&P 500 climb over 30% and 10-year yields fall 75+ basis points.

 

December 31, 2019

Yield Curve Steepens as 2019 Comes to a Close

 

Yield curve reaches steepest level since 2018.. The spread between 2-year and 10-year Treasury yields (an oft-cited indicator of recession when inverted) has widened out to nearly 35 basis points – the steepest level since 2018. While the curve remains relatively flat, many hope the re-steepening of the curve is a sign the Fed’s “insurance” rate cuts have successfully steered the economy through a global growth scare. Looking ahead to 2020, consensus is that the Fed will leave rates unchanged, but that could change quickly as new Fed voters rotate onto the FOMC...

December 30, 2019

U.S. Dollar Weakens as China Trade Tensions Feed

 

The U.S. dollar falls to its lowest level since July.. The dollar’s weakness can be attributed to the trade tensions with China fading. In response to the improving mood around trade, the euro gained 0.1% against the dollar while the Dollar Index fell to 96.8. In equity markets, U.S. S&P 500 futures are currently up 0.1%, while the Shanghai Composite Index rose 1.2%, and Hong Kong’s Hang Seng inched up 0.30% to start the week. Markets have also been calmed by the lack of subscription to the Fed’s overnight repo operations, assuaging concerns around a repeat of...

December 27, 2019

New Voters Set to Join Fed's Rate-Setting Panel in 2020

 

Four new voters will join the Fed’s rate-setting panel in January 2020.. As part of the FOMC’s annual rotation, the chiefs of the Cleveland, Philadelphia, Dallas, and Minneapolis banks will replace the leaders of the Boston, Chicago, Kansas City, and St. Louis Fed banks. Though the general market consensus is that there will be no further rate cuts in 2020, these new voters could potentially sway that prediction. Cleveland Fed President Loretta Mester and Philadelphia Fed President Patrick Harker both expressed the hawkish view that rates should not have been cute...

December 26, 2019

Builder Confidence Reaches a 20-Year High

 

U.S. home builders benefited from low interest rates in 2019.. Builder confidence reached its highest level since 1999 as reported by the National Association of Home Builders. Key companies switched strategies and increased the volume of less-expensive homes built. Targeting the entry-level market led to an increase in purchases by millennials, who have a historically lower purchasing power than past generations. This increase may not continue to 2020, as labor costs are steadily increasing due to home builders having difficulty finding workers in the current...

December 24, 2019

Markets cheer China policy easing

 

Markets cheer China policy easing. Global stock markets hovered near record highs while treasury yields edged higher in an abbreviated Christmas Eve trading session. China’s blue-chip CSI 300 index rose .7% overnight after Premier Le Keqiang said the Chinese government was considering more measures to lower corporate financing costs and hinted at “target” cuts in banks’ reserve ratio requirements. Major U.S. equity indices are opening modestly higher in early trading. The S&P 500 is up 28.6% year to date, while the tech-heavy NASDAQ...

December 23, 2019

Stocks Rally as Global Economic Outlook Improves

 

Stocks rally on optimism over U.S.-China trade deal. The global economic outlook has improved in recent weeks on signs of tangible progress between the U.S. and China regarding the phase-one trade deal. China has agreed to cut import tariffs on a range of goods including consumer products, certain foods, and technology. This comes on the back of Beijing’s commitment to lower trade barriers and boost domestic demand. The phase-one deal is expected to be signed early next year. Optimism over a prospective trade...

December 20, 2019

10-Year Treasury Yield Remains Unchanged as Impeachment Trial Moves to Senate

 

House Speaker Nancy Pelosi decided to delay giving the impeachment case to the Senate, as she asks for more clarity on the rules of the trial. The two charges will be discussed in a Senate trial that is expected to take place in January 2020. As the Senate has a Republican majority, it is expected that President Trump will be acquitted of his charges. Though the markets have priced in this expectation and remain unmoved by these political events, positive Fed commentary on the economy caused U.S. 10-year Treasury yields to rise slightly...

December 19, 2019

10-Year Treasury Yield Rises to 1.93% In Spite of Impeachment Vote

 

The U.S. House of Representatives has voted to impeach President Donald Trump. The two charges will be discussed in a Senate trial that is expected to take place in January 2020. As the Senate has a Republican majority, it is expected that President Trump will be acquitted of his charges. Though the markets have priced in this expectation and remain unmoved by these political events, positive Fed commentary on the economy caused U.S. 10-year Treasury yields to rise slightly yesterday across the curve to 1.92%.

 

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