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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   99-13 (-01.5)  
  FN 3.5% Coupon   102-30 (-01)  
  Support   2.784%  
  Resistance   1.762%  
  Tuesday, January 7, 2020

Treasury Yields Slightly Lower on Geopolitical Risk

Market opened today’s session with treasuries drifting across all maturities. 10-Year Treasury yield is at 1.8055, 0.35 bp decreased from prior closing of 1.8090.

Stocks dropped this morning as investors are waiting to see if the tension between the US and Iran will escalate with a potential retaliation from Iran. The head of Iran’s national security council said that they are assessing 13 scenarios in retaliation; however, the lack of any immediate military reaction has started to ease fears of a rapid deterioration of the situation. Nonetheless, demand in havens still remained strong this morning with Gold inching slightly higher after hitting their highest level in almost seven years and ten-year Treasury yield also falling further while the dollar was steady against the yen. The news initially sparked a rally in oil on concerns over possible disruptions to the global oil supply but the prices have settled a bit with Brent heading back toward $68 a barrel and WTI trading below $63 a barrel this morning.

The trade deficit in November shrank to a more than three year low, printing $43.10 billion vs. revised prior of $46.90 billion and $43.60 billion consensus. ISM Non-Manufacturing Index in December inched higher to 55.00 from 53.90 prior vs. 54.50 consensus. On the other hand, Factory Orders in November slipped to -0.70% from a downwardly revised prior of 0.20% vs. -0.80% consensus. Lastly, the headline Durable Goods Orders slightly nudged lower to -2.10% vs. both prior and consensus of -2.00%, and the core reading also lowered to -0.10% from 0.00% prior. Later today, the US Treasury is scheduled to auction off $38 billion of 3-year notes at 10:00 AM (PT).

The curve has bull-flattened with UST 10-Year yield down 0.35 bp.
This Week's Events
  01/06 Markit US Services PMI 06:45 Dec F 52.20 52.80 52.20 -  
  01/06 Markit US Composite PMI 06:45 Dec F - 52.70 52.20 -  
  01/07 Trade Balance 05:30 Nov -$43.60B -$43.10B -$47.20B -$46.90B  
  01/07 Factory Orders 07:00 Nov -0.80% -0.70% 0.30% 0.20%  
  01/07 Durable Goods Orders 07:00 Nov F -2.00% -2.10% -2.00% -  
  01/07 Durables Ex Transportation 07:00 Nov F - -0.10% 0.00% -  
  01/08 MBA Mortgage Applications 04:00 3 Jan - - -5.30% -  
  01/08 ADP Employment Change 05:15 Dec 160K - 67K -  
  01/09 Initial Jobless Claims 05:30 4 Jan 220K - 222K -  
  01/09 Continuing Claims 05:30 28 Dec 1720K - 1728K -  
  01/09 Bloomberg Consumer Comfort 06:45 5 Jan - - 63.90 -  
  01/10 Change in Nonfarm Payrolls 05:30 Dec 160K - 266K -  
  01/10 Average Hourly Earnings MoM 05:30 Dec 0.30% - 0.20% -  
  01/10 Average Hourly Earnings YoY 05:30 Dec 3.10% - 3.10% -  
  01/10 Wholesale Inventories MoM 07:00 Nov F 0.00% - 0.00% -  
  01/10 Wholesale Trade Sales MoM 07:00 Nov 0.20% - -0.70% -
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