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February 5, 2019

Economic Data Mixed as Investors Look Ahead to State of the Union Address

 

Fed Chair Powell and Fed Vice-Chair Clarida meet with Trump and Mnuchin ahead of State of the Union. Sources stressed that no monetary policy decisions were discussed, despite the near-constant criticism that President Trump has levied at the Fed Chair as the FOMC raised rates 4 times in 2018. At tonight’s State of the Union address, President Trump is expected to champion the economic strength of the US to a divided Congress. President Trump is also expected to call for cooperation as a mere 10 days remain for Congress to fund the government before another...

February 4, 2019

Rates and Equities Climb on Limited Volume

 

Swap rates and Treasury yields continue to climb, completing reversal since FOMC policy statement. The ten year treasury note climbed back to 2.724% on low volume as markets await President Trump’s State of the Union address and Chairman Powell’s speech later this week. China’s markets were closed for the lunar new year, contributing to the low volume in Treasurys.
 

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February 1, 2019

Blockbuster Payroll Report Sends Rates Soaring Higher

 

Blockbuster payroll report soothes recession fears. The Labor Department reported that the U.S. economy added more jobs than expected last month, suggesting that the labor market was relatively unscathed by the government shutdown. Non-farm payrolls increased 304,000 in January—well above consensus estimates of a 165,000 increase. However, the upside surprise was partially mitigated by 90,000 downward revision to December. The unemployment rate ticked up to 4% from 3.9%, reflecting the impact of furloughed federal workers and government contractors. Wage growth...

January 31, 2019

Rates Continue to Slide Ahead of Jobs Number Release

 

Rates fall as market digests weak jobless claims data and “Powell Put.” Treasury yields and swap rates continued yesterday’s momentum- falling 5-8 basis points across the curve. The 10 year treasury yield trading as low as 2.619%. 10 year swap rates are now at 2.657%, more than 7 basis points below 3 month Libor. Fed funds futures are now pricing in merely a 3.7% chance of a hike by the end of the year, and nearly a 25% chance of a rate cut. Much of the move can be attributed to a surprisingly accommodative Fed and speculation that there is a “Powell Put” in at...

January 30, 2019

Fed's Commitment to "Patience" Sends Rates Lower

 

FOMC keeps rates steady and pledges a “patient” approach to future rate hikes and balance sheet reduction. The Fed’s patience was telegraphed well in advance by a number of Fed officials in their individual appearances- and should have come of little surprise to the markets. However, markets reacted strongly to the removal of any reference to future rate hikes in the FOMC statement. Treasurys rallied sharply off the back of the announcement and press conference with yields falling as much as 6 basis points on the short end of the curve. Fed Chairman Powell didn’t...

January 29, 2019

Rates Lower, Equities Mixed Ahead of Fed Rate Decision

 

Rates fall ahead of FOMC rate decision and GDP release. Treasuries rallied ahead of those key macroeconomic releases with 5 and 10 year treasury yields falling 4 basis points to 2.54% and 2.71% respectively. While no policy change is expected from the FOMC, Fed officials will likely underscore their patient and data-dependent approach toward additional rate hikes. The Fed’s task of assessing the strength of the economy has been complicated by the absence of economic data since Christmas due to the government shutdown.  Tomorrow’s preliminary GDP report for Q4 is...

January 28, 2019

Poor Industrials Earnings Renew Fears of Global Slowdown

 

U.S. stocks fall as investors see more signs of a global slowdown. Industrial sector stocks were hit hard after Chinese industrial earnings fell 1.9% in December. In the US, Caterpillar reported sales and earnings that missed estimates-citing weak domestic and international demand. Caterpillar is often seen as a bellwether for macroeconomic activity and the company’s pessimism is the latest evidence of a slowing global economy. The S&P 500 fell 0.78%, led lower by tech stocks (-1.40%) while the S&P Bank Index closed at its highest level since November,...

January 25, 2019

Risk Markets Rally as Senate Ends Shutdown

 

Rates sharply higher as Senate votes to end shutdown. Both treasury yields and swap rates climbed 3-5 basis points higher after President Trump and Senate officials announced a temporary end to the shutdown. The current deal will last three weeks, allowing congress to continue to negotiate an agreement that will attempt to incorporate President Trump’s wall funding request. If Congress is unable to come to an agreement, President Trump is expected to invoke a national emergency to get the funding needed for a border wall. 10 year Treasury yields climbed to 2.758%...

January 24, 2019

Rates Lower as Ross Comments Spark Safe Haven Bid

 

Wilbur Ross’s hawkish comments on trade sends rates lower as Treasurys see a safe haven bid. The Secretary of Commerce caught investors off guard when he said that the US and China remain “miles and miles” apart on trade- adding that the US has an “intolerably large trade deficit with China”. Equities sold off in the aftermath of the comments, swap rates and treasury yields initially falling 3 basis points across the curve before coming back towards the end of the day. 10 year treasury yields ultimately ended the day at 2.716%.

 

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January 23, 2019

Rates Flat Ahead of Jobless Claims and PMI Data

 

Rates close nearly flat after volatile session. Treasury yields and swap rates closed nearly flat on the day. The 10 year Treasury yield rose slightly to close at 2.74%. The bond market continues to price in no hikes or cuts for the rest of 2019. Investors will closely monitor tomorrow’s jobless claims and purchasing managers reports for any evidence that the economy may be losing momentum going into 2019.

 

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