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Market Commentary

Market Commentary

February 19, 2015
10-YEAR NOTES   99-06 (-02)
FN 3.5% COUPON   104-13 (-02)
SUPPORT   2.40%
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     The FOMC released the statement from their January 27th -28th meeting yesterday in which they reaffirmed their view that the economy continues to expand at a solid pace. The committee recognized that labor market conditions have further improved, underutilization of labor resources continues to diminish, and that lower energy prices have added to consumer purchasing power. Along with this fairly optimistic outlook, the Fed acknowledged that inflation has moved further from their targeted 2%; the dip in inflation is largely reflective of the declines in energy prices. The Fed promised to once again remain "patient" in determining when to raise interest rates and consider international economic developments as it recognizes that a stronger dollar may crimp exports. As a whole the minutes were dovish, and they are keeping rates at zero, with the usual caveats of a data dependent Fed.
    Initial Jobless Claims fell below the 300K mark, reinforcing yesterday's FOMC statement regarding an improving labor market. Initial Claims fell -21K to 283K vs. 304K prior (consensus 290K) pulling the four week average to 283,250 vs. 289,750 prior. Continuing Claims increased by 58K to 2425K vs. 2354K prior (consensus 2360K). Treasuries had little reaction to today's data dump with 10-Year notes hovering near yesterday's closing levels. The curve has bear steepened with 2s10s up +1.9 bps and MBS is outperforming treasury hedges by 1-2 ticks in the production coupons led by the 4.0%.
This Week's Events:
02/19 Jobless Claims 05:30 February 14 290K 283K 304K -
02/19 Continuing Claims 05:30 February 7 2360K 2425K 2354K 2367K
02/19 Leading Index 07:00 January 0.30% - 0.50% -
02/20 Markit US Manufacturing PMI 06:45 February P 53.60 - 53.90 -
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