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August 7, 2019

Swap Rates End Volatile Session Flat, Equities Mixed



Treasury yields and swap rates recover to finish higher on the day after being down 10+ basis points. Treasurys initially rallied in response to surprise rate cuts in Asia and a steep fall in German industrial production. However, the risk-off bid petered out following a weak Treasury auction in the middle of the day, and Treasurys would ultimately close lower, yields rising 2-4 basis points across the curve. The story was the same in swap rates, 10 year swap rates at one point falling 13 basis points before climbing back to finish virtually flat on the...

August 6, 2019

US Stocks Bounce Back, Rates Mixed as Trade Tensions Abate Slightly


Former Fed Chairs Volcker, Greenspan, Bernanke and Yellen pen op-ed calling for Fed independence. The article, published in the Wall Street Journal, outlined the need for the Federal Reserve to remain data-dependent and to act free of short-term political pressure. The piece also outlined the risks of a politicized Fed, saying that “even the perception that monetary-policy decision are politically motivated… can undermine public confidence…and lead to unstable financial markets and worse economic outcomes.” The op-ed comes as markets have begun to speculate...

August 5, 2019

Rates Tumble 13+ Bps, Stocks Suffer Worst Day in 2019 as Trade Tensions Escalate


U.S. equities tumble nearly 3% as China devalues currency, further escalating trade war. The Dow Jones Industrial Average and S&P 500 both fell nearly 3% after the Chinese Yuan breached a key level of 7 CNY/USD to start the trading day. The People’s Bank of China had previously defended this level, and the Chinese currency ended the day at 7.032 CNY/USD, leading President Trump to label the price move as “currency manipulation.” The escalation in already strained trade relations triggered a massive sell-off in US equities and a big spike up in the VIX or “Fear...

August 1, 2019

New Tariff Tweet Sends Rates and Stocks Tumbling


Trump tweet on new tariffs sends markets into tailspin. President Trump’s tweet that the U.S. will levy a new 10% tariff on an additional $300 billion of Chinese goods sent markets into a frenzy only a day after the Fed surprised markets with its relative hawkishness. President Trump appeared to try and soften the tariff, characterizing it as “small” and that talks earlier this week were “constructive.” Nonetheless, U.S. equities were whipsawed by the surprise announcement. The S&P 500 and Dow Jones Industrial Average gave back earlier gains of 1% to close...

July 31, 2019

Yield Curve Flattens as Fed Cuts Rates 25 Basis Points, Disappoints on Guidance


July 30, 2019

Equities and Rates Both Fall on Eve of Fed Decision


President Trump calls for “large” interest rate cut a day before Fed rate decision. Trump has long been critical of the central bank, and his comments today were the latest in his public statements encouraging a large rate cut from the Federal Reserve. While the Fed has publicly affirmed their political independence on numerous occasions, there’s little doubt that the President’s two presumptive Fed nominees, Judy Shelton and Christopher Waller, share his dovish views. The Powell Fed is relatively evenly split between monetary hawks and doves but will be...

July 29, 2019

Rates Lower, Equities Mixed as Busy Week Kicks Off


Yellen endorses 25 bp rate cut. Speaking at a conference in Colorado , the former Fed chair said she would be “inclined” to cut rates by a quarter point. Yellen added that while a rate cut is justified by persistently-low inflation, she doesn’t see the rate cut as “the beginning… of a major easing cycle.” Those comments are consistent with the Fed’s dot plot but run somewhat contrary to the market’s pricing which implies additional Fed rate cuts later this year.



July 26, 2019

Equities Hit New Records After Solid GDP Print and Strong Earnings


U.S. Q2 GDP beats expectations but Treasurys end the day flat in quiet session. The U.S. economy grew by 2.1% last quarter, aided by strong consumer and government spending. Economists surveyed had forecasted a 1.8% growth rate. Also coming in above expectations was the GDP Price Index, which came in at 2.4% versus consensus estimates of 2%. The higher inflation and growth figures come a day after ECB President Mario Draghi said he saw nearly no risk of a recession in the Eurozone, and only add to the signs of strength seen in the US economy ahead of next week’s...

July 25, 2019

ECB Leaves Rates Unchanged, US Equities Pull Back on Weak Earnings


ECB leaves rates unchanged, sets stage for easing at September meeting. The ECB’s rate decision and subsequent press conference paved the way for fresh stimulus to boost a slowing eurozone economy. ECB President Mario Draghi said the central bank will look at a range of tools to combat disinflation, adding “we don’t like [low inflation], and therefore we are determined to act.” There had been some speculation that the ECB could cut rates today after a report earlier this week showed that German manufacturing activity sank to a ten year low, but the central bank...

July 22, 2019

Middle East Tensions Send Crude Higher, Stocks Eke Out Gains


Trump’s presumptive Fed nominee backs 50 basis point cut. Judy Shelton told the Washington Post today that she would have voted for a 50 basis point rate cut at the last Fed meeting, highlighting a potential dovish pivot at the central bank after President Trump fills the two remaining vacancies on the FOMC. President Trump’s seemingly never-ending barrage of Fed criticism continued today after he tweeted that the “Fed raised & tightened far too much & too fast.” President Trump has long viewed the Fed’s policy as a headwind for the US economy as it...


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