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March 6, 2019

Rates Fall as Canada and Europe Project Lower Growth


U.S. posts widest monthly trade gap in 10 years and record annual deficit. The record trade gap comes despite the Trump administration’s attempts to curtail imports by levying significant tariffs on foreign goods. The strong U.S. dollar was a major culprit, making foreign goods cheaper for U.S. consumers. The widening trade deficit joins the growing list of headwinds confronting the U.S. economy in the first quarter.



March 5, 2019

China Revises Growth Targets Down, US Economic Data Mixed


Fed officials suggest central bank to remain on hold. President of the Boston Fed, Eric Rosengren, says that the Fed may need several meetings before it can have clarity on the economy. Rosengren is a voting member, and his comments are the clearest indication yet that the Fed will delay any future rate hikes until growth or inflation accelerate meaningfully. Another Fed official, Dallas Fed President, Robert Kaplan, wrote today that central bank officials would pay close attention to the level and quality of corporate debt as they evaluate whether further...

March 4, 2019

Trade Deal Rumors Aren't Enough to Prevent Risk Off Move


Positive trade developments aren’t enough to push risk assets higher. Much of the good news around trade talks between US and China appears to be priced already into US equity markets. The news that President Donald Trump was pushing for a trade deal in the near-term didn’t help equities as both the S&P 500 and the Dow Jones Industrial Average fell, closing down 0.39% and 0.79% respectively. The current equity bull market, one of the longest on record, turned 10 years old today. During that bull market, the S&P 500 has returned an average of 17% per year...

March 1, 2019

Rates Continue to Climb Despite Lukewarm Inflation


US equities follow international stocks higher on strong economic data out of Germany and China. German retail sales rebounded more than expected, and China’s February manufacturing index picked up as well. The strong international data comes after an upside surprise to the US’s fourth quarter GDP figure, collectively easing investor fears of a global slowdown. The S&P 500 closed 0.69% higher while the Dow Jones Industrial Average closed up 0.43%.



February 28, 2019

Strong GDP Data From Fourth Quarter of 2018 Pushes Rates Higher


GDP expanded at a 2.6% pace in Q4, much higher than the consensus 1.8% forecast. Market participants expected weaker growth after extremely soft December retail sales data. Treasurys sold off on the strength with rates rising 3-4 basis points across the curve. It’s too early to conclude that the US economy is immune from the slowdown plaguing the rest of the world, and the strong data heightens the importance placed on Q1 growth. The market-implied probability of a rate hike in 2019 remains extremely low at a mere 2.6% while the likelihood of a rate cut by January...

February 27, 2019

Rates Rise Despite Dovish Powell and Rising Geopolitical Tensions


India-Pakistan relations deteriorate further after both countries down jets, Indian pilot held by Pakistan. Pakistan and India are facing their worst conflict in fifty years, threatening geopolitical instability between two nations with a combined 1.5 billion inhabitants. Asia equities were range-bound but the conflict will be closely watched by market participants going forward.



February 26, 2019

Powell Sees Only "Muted" Inflation and Global Risks, Pulling Rates Lower


Fed’s balance sheet runoff front and center during Jay Powell’s speech to Congress. The legislature has taken an increased interest in the pace of the Fed’s balance sheet runoff, particularly after President Trump blamed the runoff for the volatility in markets as of late. Powell noted that the Fed will likely aim to reduce its $4T balance sheet to approximately a $1T reserve amount. Powell also indicated that despite some signs of rising inflation he still considered price acceleration to be “muted”. Treasurys rallied, pushing rates down as much as 3 basis points...

February 25, 2019

US Equities Climb to Highest Level in Three Months, Rates Steady


President Trump delays implementation of new China tariffs, pushing US equities higher. The S&P 500 closed at 2,796.11- its highest level in three months. The extension of the deadline alleviates concerns that the 90 day period would be insufficient to negotiate any real trade framework between the world’s two largest economies. Rates were unchanged on the day ahead of Fed Chair Jerome Powell’s speech before Congress tomorrow morning.



February 22, 2019

Trade Talks in Washington Extended, Risk Assets Gain


Progress in US-China Trade Talks, Hurdles Remain
Trade talks in Washington between the US and China have been extended two more days to allow more time to build upon this week’s negotiation progress. It was reported that the topic of currency manipulation had been resolved between the two sides, but the ever-important disputes over technology transfer and intellectual property remain outstanding. President Trump presented an optimistic outlook following his meeting with Chinese Vice Premier Liu He this afternoon, stating “I would say it’s more likely that a...

February 21, 2019

US-China Trade Outlook Drives Rates Higher Despite Weak Economic Data


Treasurys Extend Selloff
US Treasury yields/swap rates climbed for the second consecutive day, as optimism over US-China trade talks outweighed a barrage of downbeat economic data. With one week remaining before tariffs on Chinese imports are set to increase from 10% to 25%, high-level progress in trade negotiations was reported, with multiple memorandums of understanding being constructed between the two sides. This round of talks is set to wrap up tomorrow, and markets will be closely monitoring to see if enough progress has been made to convince President...


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