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Market Commentary


 
Today's Coupons
 
  10-Year Notes   99-00 (+02.5)  
 
  FN 3.5% Coupon   102-14.5 (+00.5)  
 
  Support   3.237%  
 
  Resistance   1.529%  
 
 
 
 
Thursday, October 17, 2019
 
 
Treasury Yields Rally in Response to Brexit Deal
 
 
Market opened today’s session with treasuries lower across all maturities. The 10-Year Treasury yield is currently at 1.7640, 2.45 bps increased from prior closing of 1.7395.

Markets rallied after a draft Brexit deal was struck between the UK and the European Union. The Dow Jones was up 82 points, indicating a gain of about 70 points at the open. Futures on the S&P 500 and the Nasdaq 100 were also higher. The withdrawal agreement will be submitted to EU leaders at their summit on Thursday and Friday, and then be sent for review/approval by UK lawmakers. Michel Barnier, the EUs chief Brexit negotiator, confirmed that Ireland will remain part of the UKs customs territory and would be the entry point into the EUs single market. He also stated that Northern Ireland would remain aligned to some EU rules, mostly related to goods. Barnier also added that the EU and the UK would work toward an ambitious free trade deal with zero tariffs and quotas, and that the transition period would last until the end of 2020. After repeatedly opposing previous plans, the Northern Irish Democratic Unionist Party (DUP), a key ally to the government, has responded by saying that it cannot support the deal due to the proposed customs and consent arrangements. The UK government, which does not have a majority in the British Parliament, needs the Northern Irish Democratic Unionist Partys votes to approve the deal. The British Pound is 0.8% higher against the dollar, reaching a five-month high. The US Treasury will offer $55 billion at its weekly auction of four-week bills, an increase of $5 billion from the last offering. The US Treasury will offer $40 billion at its weekly auction of eight-week bills.

The US Department of Labor reported that jobless claims rose to 214,000 while continuing claims fell within the last week. State claims showed 47 states and territories reporting increased claims, while 6 reported lower filings for unemployment benefits. Illinois and Texas led states and territories with increased claims, while Ohio and Michigan led those reporting fewer claims. The data suggested the labor market continued to tighten despite slowing hiring and economic growth. The Federal Reserve said that a number of districts reported that manufacturers reduced their headcounts because orders were soft. But a strike by about 48,000 General Motors workers could have weighed on employment gains. Striking workers, who did not receive a paycheck during the surveyed period, are counted as unemployed. GM and the United Auto Workers Union reached a provisional deal on Wednesday to end the month-long strike that cost the automaker approximately $2 billion. The Boeing 737 Max has been grounded worldwide since mid-March after two fatal crashes killed 346 people. Some airlines have said they don’t expect the 737 Max to return until February, at the earliest. Crash investigators suspect the flight control software misfired, repeatedly pushing the nose of the planes down on both crashed flights. Boeing stated it has developed a fix for the malfunctioning software, but it has not been delivered to regulators for final review yet. Boeing paid out nearly $5 billion in July to compensate airlines for the cancelled 737 Max flights, but a total is still unknown as the grounding passes the seven-month mark.

The curve has bear-steepened with the UST 10-Year yield up 2.45 bps from prior closing.
 
 
   
 
   
 
This Week's Events
 
 
  DATE EVENT TIME(PT) PERIOD SURVEY ACTUAL PRIOR REVISED  
  10/15 Monthly Budget Statement 11:00 Sep $83.00b - $119.10b -  
                   
  10/16 MBA Mortgage Applications 04:00 11 Oct - 0.50% 5.20% -  
                   
  10/16 Retail Sales Advance MoM 05:30 Sep 0.30% -0.30% 0.40% 0.60%  
                   
  10/16 NAHB Housing Market Index 07:00 Oct 68.00 71.00 68.00 -  
                   
  10/16

U.S. Federal Reserve Releases Beige

Book

11:00 - - - - -  
                   
  10/16 Net Long-term TIC Flows 13:00 Aug - -$41.10b $84.30b $83.80b  
                   
  10/16 Total Net TIC Flows 13:00 Aug - $70.50b $43.80b $43.30b  
                   
  10/17 Initial Jobless Claims 05:30 12 Oct 215k 214k 210k -  
                   
  10/17 Continuing Claims 05:30 5 Oct 1675k 1679k 1684k 1689k  
                   
  10/17 Housing Starts 05:30 Sep 1320k 1256k 1364k 1386k  
                   
  10/17 Housing Starts MoM 05:30 Sep -3.20% -9.40% 12.30% 15.10%  
                   
  10/17 Building Permits 05:30 Sep 1350k 1387k 1419k 1425k  
                   
  10/17 Building Permits MoM 05:30 Sep -5.30% -2.70% 7.70% 8.20%  
                   
  10/17 Philadelphia Fed Business Outlook 05:30 Oct 7.60 5.60 12.00 -  
                   
  10/17 Capacity Utilization 06:15 Sep 77.70% 77.50% 77.90% -  
                   
  10/17 Bloomberg Consumer Comfort 06:45 13 Oct - 63.50 62.70 -  
                   
  10/18 Leading Index 07:00 Sep 0.00% - 0.00% -
                   
 
 
 
 
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