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November 7, 2019

Rates and Stocks Rise as Tariff Rollback Suggested By Chinese Officials

 

China and US appear to agree to phased tariff rollback, sending risk assets higher once more. The rollback is the first step in what financial markets now hope is a gradual de-escalation of the trade war—though a final trade deal of substance appears quite a ways off. Equities rose in Asia as a result- the Hang Seng rising 0.57% on the day, the S&P 500 also opening higher by 0.07%. Treasury yields and swap rates are higher by 4-7 basis points amid the risk-on move, the 10-year Treasury yield climbing near 1.89%.

 

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November 6, 2019

10-Year Climbs to 1.86%, Dow and Nasdaq Notch New Records

 

Swap rates and Treasury yields continue to climb. Swap rates and Treasury yields climbed across the curve yesterday, the 10-year Treasury yield climbing all the way to 1.86%. Amid the sell-off in Treasurys, the yield curve has also steepened significantly- the spread between 2-year and 10-year yields widening out to nearly 23 basis points. At least a few members of the Fed have taken it as a sign of a job well done- Dallas Fed President Robert Kaplan remarking that the steepening “reinforces that we’ve probably got an appropriate setting of the Fed funds rate now...

November 5, 2019

Rates Jump Higher, Stocks Hit New Records Amid Continued Positive Sentiment Around Trade

 

Treasury yields continue to rise amid optimism around a preliminary trade deal between the US and China. The 10-year Treasury yield has climbed 15 basis points over the past two days to 1.86%, back into the range it occupied for much of October. Chinese President Xi Jinping added to the positive sentiment this morning, saying that the country will “continue to lower tariffs and institutional transaction costs.” Elsewhere in rates markets, Minneapolis Fed President Neel Kashkari said yesterday that he is “happy with the way the [FOMC] committee has moved over the...

November 4, 2019

Rates Higher Across the Curve Amid Positive Trade Developments

 

Commerce Secretary Wilbur Ross says that the US and EU are close to agreement on automobile imports. The agreement would potentially eliminate automobile tariffs, a welcome sign of progress on the trade front with US allies. The US and China also appear to be close to agreeing to a location for the signing of a “phase one” trade agreement that was originally supposed to be signed in Chile before that summit was cancelled due to civil unrest in the South American country. The positive sentiment around trade has rates higher by 6+ basis points across the curve to...

November 1, 2019

Jobs Report Stronger than Expected, Confirming Fed's View that Economy Remains Solid

 

“USA ROCKS!”- strong jobs report confirms that US economy remains solid. The US economy added 128,000 jobs in the month of October, much higher than estimates that had called for a five-month low of 85,000. The prior month was also revised higher to 180,000, while wage inflation came in line with forecasts (3% on an annualized basis). The unemployment rate ticked higher to 3.6% as expected, and perhaps most importantly- labor force participation for the prime age group climbed to a cycle high . President Trump quickly tweeted in celebration, saying “wow a blowout...

October 31, 2019

Fed Cuts Rates as Expected, Signals Pause in Rate Changes

 

FOMC cuts rates as expected, now looks to pause. The Fed made good on market expectations yesterday by cutting policy rates by 25 basis points. The Fed’s statement removed its pledge to “act as appropriate to sustain the expansion,” suggesting that rates are on hold for the foreseeable future. Fed Chair Jerome Powell echoed that sentiment in his press conference- saying that the Fed would need to see a “material deterioration” to their economic outlook before cutting rates again. Fed funds futures are currently pricing one cut throughout all of 2020. Future rate...

October 29, 2019

Rates Rise as Equity Indices Hit New Records

 

Stocks jump to new record as US and China appear to approach a “phase one” trade agreement. That news, coupled with a formal delay to the Brexit deadline helped risk assets rally yesterday, the S&P 500 rising 0.60% to close at an all-time high of 3,039. The DJIA and Nasdaq also rose, gaining 0.50% and 1.00% respectively. Markets will now turn their attention to a bevy of corporate earnings set to report- this morning General Motors and Alphabet have reported results that missed estimates, while pharmaceutical companies like Pfizer and Merck both reported...

October 24, 2019

Rates Lower as Durable Goods Orders Fall More Than Expected, ECB Begins Bond Purchases

 

European Central Bank leaves policy rates unchanged, confirms restart of bond purchases. The ECB left their deposit rate unchanged at -0.50%, a move largely expected after last month’s big rate cut. The ECB also confirmed that they will purchase $20B worth of bonds each month as they attempt to kickstart inflation and growth. While ECB President Mario Draghi’s term is coming to an end, it’s unlikely Christine Lagarde (his successor and former head of IMF) will bring about any major changes as she is considered at least as dovish as Draghi. Lagarde inherits the...

October 23, 2019

Rates Fall as Brexit Appears Headed for Delay

 

Treasury yields and swap rates fall as UK parliament votes against expedited approval of proposed Brexit agreement. Treasurys reversed their losses late yesterday as news emerged that the UK parliament had voted against Boris Johnson’s expedited timeline to approve his Brexit agreement. A temporary extension past the 10/31 deadline is now expected, though consensus is still that the agreement will be passed. Rates ultimately fell 3-4 basis points across the curve, the 10-year Treasury yield falling to 1.76%. Rates are again 2-4 basis points lower this morning amid...

October 22, 2019

S&P 500 Approaches Record, Rates Rise as Preliminary Trade Agreement Appears Set for November

 

S&P 500 closes above 3000 as earnings season gets underway. The S&P 500 climbed 0.70% yesterday to close above 3000- it’s highest level in over a month, and only 0.60% away from its all-time high. The move was largely driven by optimism around a potential trade deal between the US and China. Larry Kudlow, a top economic adviser to President Trump said negotiations are “looking pretty good” and indicated a partial deal could be signed as soon as November. Looking ahead, 50 different companies in the S&P 500 are set to report earnings today.

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