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October 27, 2015

Bid for Safer Assets Continues Ahead of Fed Meeting

Stocks declined with oil while Treasury yields and swap rates rallied as investors continued to shy away from riskier assets ahead of the FOMC.  The Fed isn’t expected to tighten this week (only 6% implied probability), but the statement may provide insight into the committee’s thinking as it relates to China’s economic slowdown and slumping oil prices.  US natural gas traded below $2 for the first time since 2012, and WTI continues to slide below the $50 threshold, heightening global deflation fears.  The Fed is likely to acknowledge these concerns with certain tweaks in the language, but...

October 26, 2015

Appetite for Risk Takes a Pause as Investors Focus on Fed

Stocks declined marginally while Treasury yields and swap rates rallied as we kick off an important week for investors with a cautious tone.  The major event this week is the October Fed meeting, which concludes Wednesday, and is followed by the rate decision and release of the updated policy statement.  Traders are pricing in a very small chance of a rate increase at this week’s meeting, but market-participants will look for a change to the Fed’s economic outlook in the policy statement.  Other central banks remain in focus as well after last week’s dovish speech from ECB head Draghi and...

October 23, 2015

Appetite for Risk Continues Off the Back of Chinese Rate Cut and Tech Earnings

Stocks added to their recent gains while Treasury yields and swap rates traded higher across the curve after China unexpectedly cut its benchmark lending rate and reserve requirements for banks.  The PBoC’s 25 basis point reduction is its sixth cut this year and the latest attempt at invigorating its slowing economy.  Beijing is under pressure to meet its 7% growth target amid the 11th straight month of falling imports and over 3 years of deflationary producer prices.  The announcement came one day after the European Central Bank said it is prepared to expand its monetary stimulus when it...

October 22, 2015

Risk Assets Get Boost from Dovish Draghi and US Fundamentals

Stocks rallied while Treasuries and swap rates fluctuated as markets reacted to dovish comments from ECB President Draghi, strong US data and corporate earnings, and the surprise postponement of next week’s 2-year auction.  The ECB kept its benchmark interest rate at 0.05%, as expected, but Draghi suggested that fresh stimulus is on the table at the December meeting.  Draghi said the ECB is considering a variety of options including further cuts to key interest rates and an expansion of quantitative easing.  The bond purchasing program was originally scheduled to end September 2016, but...

October 21, 2015

Global Growth Concerns Remain as Oil and Bond Yields Decline

US stocks fluctuated, Treasury yields and swap rates rallied, and Chinese equities and oil declined off the back of global growth and inflation concerns.  Chinese stocks declined nearly 3%, their biggest drop since September 15th, a flashback of this summer’s volatility for investors.  Corporate earnings in the US have for the most part been positive, helping to offset concerns about the implications of a slowing Chinese economy, but today’s Japanese trade data reminded investors that global growth still faces significant headwinds.  Japanese exports grew at the slowest pace in over a year...

October 20, 2015

Strong US Housing Data and Supply Weigh on Treasuries

Stocks fluctuated while Treasury yields and swap rates sold off across the curve as investors digested better-than-expected US housing data and mixed corporate earnings.  Housing starts jumped 6.5% in September to an annual rate of 1.21 million, above the 1.14 million consensus estimate.  The increase was fueled by an 18.3% rise in multifamily units (apartments and condominiums), but single-family units also rose.  A separate report showed building permits fell 5% to an annual rate of 1.1 million, but home construction figures can be volatile and are often subject to revisions.  Housing...

October 15, 2015

US Inflation and Jobless Claims Data Boost Stocks and US Dollar

Stocks rallied while Treasuries and swap rates sold off across the curve as investors speculated about the impact of recent data on central bank monetary policy.  Today’s US data was quietly better than expected, but yesterday’s disappointing readings on consumer spending and inflation, and September’s weak payrolls report, all but ensured the Fed will remain on hold through at least October.  The Wall Street Journal’s Hilsenrath put out a piece last night that spoke to the weaker data weighing on the Fed’s thinking.  The article also mentioned the two Fed Governors, Brainard and Tarullo,...

October 14, 2015

Disappointing Economic Data Dampens Growth Outlook Spurring Risk Off Trade

Stocks declined while Treasuries and swap rates rallied across the curve after a variety of economic reports pointed to a cooling global economy.  The bid for safer assets started overnight after Japanese producer prices and consumer confidence both missed estimates and Chinese inflationary pressures cooled.  China’s National Bureau of Statistics said that consumer prices rose 1.6% (vs 1.8%e) in September YoY, down from the 2% rise in August, and well below Beijing’s 3% target.  The weak inflation data reflects a slowdown in China’s economy, and could pave the way for further stimulus from...

October 13, 2015

Chinese Trade Data Weighs on Global Growth Outlook

Stocks fluctuated with oil while Treasuries and swap rates rallied after disappointing Chinese trade data renewed global growth concerns.  Chinese exports showed some resilience, declining less than forecast, but imports fell for the eleventh straight month, plunging 20% in August due to weak domestic demand.  The weak report dragged down emerging assets due to concern that the Chinese slowdown will spread to other less-developed economies.  China is set to release a number of economic reports in the coming days, headlined by next week’s GDP report, which is now likely to fall below...

October 9, 2015

Stocks and Treasuries Little Changed in Light Trading Ahead of Holiday Weekend

Stocks, Treasury yields, and swap rates all traded close to unchanged as markets continued to digest yesterday’s more dovish than expected FOMC minutes.  Traders appear to be ignoring individual Fed policymakers who have come out and said they still anticipate a rate hike before year end, instead focusing on the more conservative sounding September policy statement and minutes.  The minutes revealed that the Fed held off on raising rates last month because of concerns that inflation could remain stagnant, held down by the stronger dollar, declines in oil and other commodities, and weak...

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