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December 18, 2019

U.S. Housing Sector Shows Signs of Growth

 

Treasury yields range-bound yesterday as impeachment overshadows trade. Later today, the House will debate and vote on the two articles of impeachment filed against President Donald Trump. Democrats currently hold a 233-197 majority in the House and are expected to impeach the President later this evening- an event long priced in by markets. Once the House votes to impeach, the proceedings will move to the more evenly divided Senate for a trial in January. President Trump sent a letter to House Speaker Nancy Pelosi in response to the...

December 17, 2019

Rates Rise Despite Lack of Phase-One Specifics

 

Risk assets continued to to rally yesterday on the prospect of a phase one trade deal with China and the potential for additional trade pacts with Mexico and Canada. The specifics of the phase one agreement has yet to be announced but yesterday President Trump suggested that China had committed to step up its purchases of US agricultural products to nearly $50B in goods. Most pundits have reacted with skepticism to that figure, suggesting that level of agricultural buying would have “market distorting powers” and that the commitment is...

December 16, 2019

Rates Fall Across the Curve Despite Phase-One Deal

 

Rates seesaw on trade developments, falling across the curve despite phase one trade agreement with China. Markets reacted poorly on Friday to the lack of detail surrounding tariff rollbacks, the 10-year yield falling 7 basis points to 1.82% after jumping as much as 15 basis points the prior day. All that said, the long awaited trade agreement coupled with the Conservative party’s victory in UK’s general election removes two of the major risks weighing on markets as we approach year end. That bullish sentiment was perpetuated by Fed...

December 13, 2019

Market Reacts Positively to UK Election and Phase-One Deal

 

A phase-one U.S. China trade agreement looks within reach.  Yesterday, President Trump has agreed to roll back existing tariff rates on Chinese goods and cancel the new levies that would have taken effect this Sunday. China's state counsel information office will hold a press conference at 9:30 AM EST to provide commentary on the deal. The current 10-year Treasury yield is 1.866%.

 

December 12, 2019

Fed and ECB Leave Policy Unchanged

 

Fed leaves rates unchanged, confirms view that current monetary policy is appropriate. The Fed voted unanimously to keep the Fed Funds range unchanged at 1.50%-1.75%, adding in their statement that “the current stance of monetary policy is appropriate to support sustained expansion of economic activity.” The Fed also removed a previous reference to “uncertainties” from their FOMC statement, suggesting the central bank’s outlook is improving marginally. A new “dot plot” was also released, and shows near unanimous...

December 11, 2019

Markets Await FOMC Meeting Announcement

 

Financial markets have been quiet ahead of the Fed’s policy decision this afternoon -- equities and Treasury yields holding within a tight range, with the 10-year UST yield near 1.83%. The next round of US tariffs on roughly $160 billion worth of Chinese goods, scheduled for December 15th implementation, remains one of the primary risks to global markets. Earlier this week, Chinese trade officials publicly provided their expectation that the tariffs would be delayed/permanently suspended, but their US counterparts have continued to leave...

December 10, 2019

Rates Mixed as FOMC Kicks Off Two Day Meeting

 

US equities fall for the first time in four days as investors grow antsy about US-China trade negotiations. No news is bad news it seems, the S&P 500 falling 0.30% yesterday as markets anxiously await an update on a phase one trade agreement between the US and China. This morning there are new reports that the US won’t impose its scheduled December 15th tariffs on China, helping US equity futures rise to start the day.

 

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December 9, 2019

Futures and Rates Lower to Start Busy Week

 

Rates rose across the curve after the strong jobs report released on Friday.  The report confirmed the Fed's policy for holding rates steady after the robust hiring in November ahead of FOMC meeting this Thursday. The 10-year yield would ultimately rise 3 basis points to close at 1.84%, the spread between 2-year and 10-year Treasury yields increasing to 22 basis points.

 

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December 6, 2019

Jobs Report Crushes Forecasts, Sending Rates and Stocks Higher

 

Blockbuster jobs report shatters expectations as unemployment rate dips to 50-year low. The jobs report beat expectations by adding 266,000 jobs in the month of November (estimates had called for an increase of 180,000)- bringing the three month average up to 205,000 (a 10-month high). The unemployment rate fell to a 50-year low of 3.5%. The report confirms the Fed’s view that the US economy remains on solid footing, and that their policy remains appropriate ahead of next week’s FOMC meeting. Fed Fund futures imply a mere 3.0% likelihood of a rate hike at the 12/...

December 5, 2019

Rates Bounce Back as Trade Remains in Focus

 

Optimism around “phase one” deal helps rates rise across the curve, offsetting some of Tuesday’s rally. The news that the US and China are continuing to progress in talks around a phase one trade deal was enough to help rates climb 4-6 basis points across the curve. The 10-year Treasury yield would ultimately rise to 1.77%, offsetting a portion of Tuesday’s significant rally which saw yields/swap rates drop 10+ basis points. Trade will undoubtedly remain in focus as we approach the next series of US tariffs on December 15th.

 

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