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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   99-12 (+18)  
  FN 3.5% Coupon   102-30.5 (+01)  
  Support   2.784%  
  Resistance   1.786%  
  Friday, January 03, 2020

Treasury Yields Nudge Lower on Geopolitical Concerns

Market opened today’s session with treasuries rallying across all maturities. 10-Year Treasury yield is at 1.8142, 6.29 bps decreased from prior closing of 1.8771.

Stocks fell sharply this morning on escalating tensions between the US and Iran. The S&P 500 headed for its biggest drop in a month after the US confirmed that an airstrike in Baghdad killed Iran’s top military commander, triggering oil prices to surge. Iran’s leader threatened “severed retaliation”. Consequently, raising concerns about an energy shock sent airline stocks including United, American, and Delta south. Haven assets are in demand this morning including gold which hit the highest level in four months and Treasuries of which the yield is heading for its biggest drop in three weeks. Aside from ongoing geopolitical tensions over the Middle East and North Korea, the Fed will release meeting minutes later today at 11:00 AM (PT) which may shed some light on their plan to maintain control over the repo market. Investors will be watching for any plan to introduce a standing repo facility which would allow banks to convert eligible assets into reserves on demand. Elsewhere, WTI crude oil traded above $63 a barrel this morning on the aforementioned airstrike news in Iran. Construction Spending in November increased to 0.60% from upwardly revised prior of 0.10% vs. 0.40% consensus. ISM Manufacturing in December slid to 47.20 from 48.10 prior vs. 49.00 consensus, and lastly, ISM Prices Paid surged to 51.70 from prior reading of 46.70.

The curve has bull-flattened with UST 10-Year yield down 6.29 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% 0.60% -0.80% 0.10%  
  01/03 ISM Manufacturing 07:00 Dec 49.00 47.20 48.10 -  
  01/03 ISM Prices Paid 07:00 Dec 47.80 51.70 46.70 -  
  01/03 FOMC Meeting Minutes 11:00 11 Dec - - - -
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