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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   103-18 (+15)  
  FN 3.5% Coupon   102-17.5 (+08)  
  Support   3.237%  
  Resistance   1.975%  
Thursday, June 20, 2019
Treasury Yields Lower on Interest Rate Outlook
Market opened today’s session with treasuries advancing across all maturities. 10-Year Treasury yield is at 2.0009, 2.24 bps decreased from prior closing of 2.0233.

The Fed finally ditched their long-standing "patient" stance yesterday. US equity futures sharply rose along with the Treasuries as the Fed’s dovish shift reverberated through markets this morning. Many market participants viewed their tone as more dovish-than-expected after the Fed signaled that the interest rate cuts could come as early as next month. 7 of 17 Fed officials slashed their rate outlook by a half percentage point by the end of the year. Fed Chair Powell added that uncertainties over intensifying trade tensions and growing concerns about inflation had been building the case for a rate reduction as officials sought to prolong America’s current economic expansion. The Fed’s message sent the benchmark yield south, below 2.00% at one point for the first time since November 2016. In the UK, the Bank of England also kept their policy unchanged but mentioned that the perceived risk of Brexit without a deal had risen. Elsewhere, WTI crude jumped above $56 a barrel this morning after Iran shot down an American drone.

The first quarter Current Account Balance narrowed to -$130.4 billion from a revised prior of -$143.9 billion. The labor market remained tight as Initial Jobless Claims printed 216k following a prior reading of 222k while consensus called for 220k. Continuing Claims also declined to 1662k from an upwardly revised prior of 1699k vs. 1680k consensus. Philadelphia Fed Business Outlook in June sharply fell to 0.30 from 16.60 prior while consensus called for 10.40. On the contrary, Bloomberg Consumer Comfort edged higher to 61.80 from a prior reading of 61.60, and lastly, Leading Index in May came in flat, down from a revised prior of 0.10%. Later today, the US Treasury is scheduled to auction off $40 billion of 4-week bills and $35 billion of 8-week bills at 8:30 AM (PT), and $15 billion of 5-year TIPS reopening at 10:00 AM (PT).

The curve has bull-flattened with UST 10-Year yield down 2.24 bps.
This Week's Events
  06/17 Empire Manufacturing 05:30 Jun 11.00 -8.60 17.80 -  
  06/17 NAHB Housing Market Index 07:00 Jun 67.00 64.00 66.00 -  
  06/18 Housing Starts 05:30 May 1239k 1269k 1235k 1281k  
  06/18 Housing Starts MoM 05:30 May 0.30% -0.90% 5.70% 6.80%  
  06/18 Building Permits 05:30 May 1292k 1294k 1296k 1290k  
  06/18 Building Permits MoM 05:30 May 0.10% 0.30% 0.60% 0.20%  
  06/19 MBA Mortgage Applications 04:00 14 Jun - -3.40% 26.80% -  
  06/19 FOMC Rate Decision (Upper Bound) 11:00 19 Jun 2.50% - 2.50% -  
  06/19 FOMC Rate Decision (Lower Bound) 11:00 19 Jun 2.25% - 2.25% -  
  06/20 Philadelphia Fed Business Outlook 05:30 Jun 10.40 0.30 16.60 -  
  06/20 Initial Jobless Claims 05:30 15 Jun 220k 216k 222k -  
  06/20 Continuing Claims 05:30 8 Jun 1680k 1662k 1695k 1699k  
  06/20 Bloomberg Consumer Comfort 06:45 16 Jun - 61.80 61.60 -  
  06/20 Leading Index 07:00 May 0.10% 0.00% 0.20% 0.10%  
  06/21 Markit US Manufacturing PMI 06:45 Jun P 50.50 - 50.50 -  
  06/21 Markit US Services PMI 06:45 Jun P 51.00 - 50.90 -  
  06/21 Markit US Composite PMI 06:45 Jun P - - 50.90 -  
  06/21 Existing Home Sales 07:00 May 5.27m - 5.19m -  
  06/21 Existing Home Sales MoM 07:00 May 1.50% - -0.40% -
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