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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   99-02.5 (+16.5)  
  FN 3.5% Coupon   102-30.5 (+03)  
  Support   2.784%  
  Resistance   1.786%  
  Thursday, January 02, 2020

Treasury Yields Lower as Rally Extends into New Year

Market opened today’s session with treasuries rallying across all maturities. 10-Year Treasury yield is at 1.8683, 4.92 bps decreased from prior closing of 1.9175.

Last year, stocks booked a very memorable performance with the S&P 500 rising 28.9%, the Dow climbing 22.3% and the Nasdaq gaining more than 35% annually. Stocks kicked off the new year in bullish start, building on the strong rally in 2019 as investor sentiment got boosted after People’s Bank of China announced its policy to increase the supply of cheap funding to banks to support its economy. Treasuries also surged along with the dollar. On the trade front, the pressure seems to be off at this point after President Trump said that he will sign phase one trade deal with China on January 15th at the White House earlier this week although China has not yet confirmed the date. Investors are also keeping an eye on geopolitical tensions where Kim Jong Un from North Korea declared that he was no longer bound by his pledge to halt major missile tests and would soon debut a “new strategic weapon”. Elsewhere, WTI crude pared a gain, trading slightly above $61 a barrel this morning.

Initial Jobless Claims continued to display healthy labor market conditions as it fell to 222k from upwardly revised prior of 224k vs. 220k consensus. However, Continuing Claims slightly edged higher to 1728k from upwardly revised prior of 1723k. The ongoing strong hiring momentum will likely lead to further tightening of the labor market with many economists now expecting the unemployment rate to reach low 3.00% by the end of this year. Bloomberg Consumer Comfort climbed to 63.90 from 62.30 prior and lastly, Markit US Manufacturing PMI slightly edged lower to 52.40 from both prior reading and consensus of 52.50. Later today, the US Treasury is scheduled to auction off $35 billion of 4-week bills and $35 billion of 8-week bills at 8:30 AM (PT).

The curve has bull-flattened with UST 10-Year yield down 4.92 bps.
This Week's Events
  12/30 Wholesale Inventories MoM 05:30 Nov P 0.20% 0.00% 0.10% 0.00%  
  12/30 Pending Home Sales MoM 07:00 Nov 1.40% 1.20% -1.70% -1.30%  
  12/30 Pending Home Sales NSA YoY 07:00 Nov 7.40% 5.60% 3.90% 4.40%  
  12/30 Dallas Fed ManfActivity 07:30 Dec 0.00 -3.20 -1.30 -  
  12/31 FHFA House Price Index MoM 06:00 Oct 0.40% 0.20% 0.60% 0.70%  
  12/31 S&P CoreLogic CS 20-City MoM SA 06:00 Oct 0.30% 0.43% 0.36% 0.35%  
  12/31 S&P CoreLogic CS 20-City YoY NSA 06:00 Oct 2.10% 2.23% 2.10% 2.08%  
  01/01 No Data - - - - - -  
  01/02 Initial Jobless Claims 05:30 28 Dec 220k 222k 222k 224k  
  01/02 Continuing Claims 05:30 21 Dec 1680k 1728k 1719k 1723k  
  01/02 Bloomberg Consumer Comfort 06:45 29 Dec - 63.90 62.30 -  
  01/02 Markit US Manufacturing PMI 06:45 Dec F 52.50 52.40 52.50 -  
  01/03 Construction Spending MoM 07:00 Nov 0.40% - -0.80% -  
  01/03 ISM Manufacturing 07:00 Dec 49.00 - 48.10 -  
  01/03 ISM Prices Paid 07:00 Dec 47.50 - 46.70 -  
  01/03 FOMC Meeting Minutes 11:00 11 Dec - - - -
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