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October 21, 2019

Brexit Vote Delayed, Rates and Equities Higher Amid Earnings Optimism


Rates and risk assets rise as optimism around corporate earnings helps outweigh trade headwinds. The S&P 500 has risen 0.40% on the day as earnings season in the US continues in full swing. Companies reporting this week include Amazon, Microsoft, Kia, McDonald’s, Proctor & Gamble and Caterpillar. Treasury yields and swap rates are also higher amid the optimism, up 1-2 basis points after a mixed Friday. The FOMC has now entered its quiet period ahead of its 10/31/2019 meeting, Fed Funds futures currently pricing in a 89.4% likelihood of an additional rate...

October 18, 2019

Rates Move Sideways Amid Brexit Vote, Weak China Growth Numbers


Rates trade sideways ahead of Brexit vote. Treasurys fell yesterday, yields rising ~1 basis point across the curve, but have already reversed those losses today- the 10-year Treasury yield falling to 1.74%. The announcement that the UK and EU had agreed to a deal on Brexit negotiations was originally greeted with optimism by markets, but since then the British Pound and FTSE 100 have both retraced their gains- markets seemingly pricing in Boris Johnson’s inability to get the Brexit deal passed through the House of Commons. Parliament is due to debate the agreement...

October 17, 2019

Potential Brexit Deal Emerges as Deadline Looms


Brexit deal emerges, but UK PM Boris Johnson still needs to win approval from Parliament. Risk assets are higher this morning as a result- the British Pound, European equities and US futures all sitting higher as optimism around a deal continues to grow. EU leaders and British Parliament will still need to approve a deal if the UK is to exit the EU by the 10/31 deadline. The former is the real sticking point as Boris Johnson’s allies in the Democratic Unionist Party won’t support the deal, meaning he has to convert existing holdouts in Parliament into voters. If...

October 16, 2019

Rates Lower Across the Curve as Hong Kong Protests, Brexit Move Back Into Focus


US House of Representatives passes measure backing pro-democracy movement in Hong Kong, leading Chinese to threaten retaliation. Markets have long feared the protest movement in Hong Kong spilling into trade negotiations- President Trump and his counterpart Xi Jinping having avoided the topic thus far. The nonspecific threat of “strong countermeasures” by the Chinese sent futures lower this morning. Treasurys reversed yesterday’s move on the news (and a negative surprise in retail sales), rates sitting 4-5 basis points lower to start the day. Amid all the...

October 10, 2019

Rates and Futures Little Changed Ahead of Key US-China Trade Meeting


Fed minutes show FOMC increasingly focused on low inflation. With unemployment at a 50-year low and most fundamentals of the US economy looking solid, many FOMC members pointed to persistently low inflation as the rationale for the second “insurance” rate cut last month. Otherwise, FOMC members seemed to disagree on the number of insurance cuts needed this cycle, but generally agreed that the outlook for the US economy had deteriorated since the prior Fed meeting in June. Current Fed funds futures imply a 82% likelihood of another rate cut in a few weeks’ time-...

October 9, 2019

Rates and Stocks Set to Bounce Higher as China is Said to be Open to Limited Trade Deal


Trade seesaw continues. High-level US/China trade talks are set to continue tomorrow after concerns around the viability of a trade deal sent rates and stocks lower yesterday. However, this morning futures and rates are bouncing back amid news that China is open to a limited deal, provided the US poses no additional tariffs. In return, China would boost purchases of US agricultural goods. The 10-year Treasury yield is sitting 2.2 basis points higher this morning at 1.55%- 4 basis points higher than where it started the week.



October 8, 2019

US Puts 8 Chinese Companies on Blacklist, Denting Optimism Ahead of Trade Talks


Trade roller coaster continues as US puts eight Chinese companies on blacklist and China bans NBA broadcasts. The Chinese companies on the US blacklist will now be unable to sell goods in the US without a government license- denting the optimism that had surrounded the upcoming trade talks. China had already taken the step of halting NBA broadcasts earlier yesterday in response to a tweet by the general manager of the Houston Rockets that appeared to support Hong Kong’s ongoing protest movement. US equity futures point to a lower open in reaction to the news....

October 7, 2019

German Factory Data Points to Potential Recession, US Stocks Lower as Trade Moves Back Into Focus


Latest German factory orders show Germany is likely in recession. Factory orders dropped again in August after an extremely weak July figure. Other business surveys and GDP figures also show a potentially contracting German economy that has been harmed by global trade headwinds and structural issues effecting its automobile industry. A German recession has not always led to a contraction in the Eurozone economy, but it will certainly add to the already considerable downward pressure on rates- Germany’s 10-year Bund yield already sitting at -0.58%.


October 4, 2019

Mixed Payrolls Report Reveals Steady Hiring, Muted Inflation


Payrolls additions in the US continued at a steady pace during September (+136,000), as the unemployment rate declined to a 50-year low of 3.5%. While the +136k figure missed expectations of +145k, the prior two months levels were revised 45k higher. A weak spot in the report by the Labor Department was observed in the average hourly earnings, which remained flat on a month-over-month basis and climbed 2.9% (+3.2% expected) from September 2018. Financial markets were largely unchanged following the mixed release.


October 2, 2019

Weak US Manufacturing Activity Weighs on Financial Markets


Swap rates and Treasury yields went for a wild ride yesterday. The impact of a weaker-than-expected auction of Japanese 10-year debt spilled into Treasury markets, initially pushing yields/rates 6-10 basis points higher across the curve before an abysmal US manufacturing print reversed all of the selloff and then some. The manufacturing index reported by the Institute for Supply Management fell to its lowest level in more than a decade during September, hinting that the wrath of the US-China trade war may finally beginning to makes itself felt in domestic factory...


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