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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   98-13 (+12)  
  FN 3.5% Coupon   102-10 (+02)  
  Support   3.237%  
  Resistance   1.457%  
Tuesday, September 17, 2019
Treasury Yields Decline: Monetary Policy Meeting - Day 1
Market opened today’s session with treasuries rallying across all maturities. 10-Year Treasury yield is at 1.8153, 3.14 bps decreased from prior closing of 1.8467.

Stocks fell for a second day as the Federal Reserve begins their two-day monetary policy meeting. The Dow Jones fell 86 points, indicating a loss of 0.30% at the open, and the S&P 500 and Nasdaq Composite were also marginally lower. Market expectations for a rate cut were at 63.50% however, expectations for the central bank to maintain its current levels were reported at 36.50%, up from 7.70% a week ago. The Federal Open Market Committee meeting is scheduled to end Wednesday, when the central bank is expected to announce its latest decision on monetary policy. After a series of drone strikes on about half of Saudi Arabia’s daily crude production (approximately 5.7 million barrels), West Texas Intermediate crude oil jumped more than 14%, its biggest one-day gain since 2008. Energy stocks saw a boost from the higher oil prices, with the sector showing a gain of 3.41%. Saudi Aramco, the national oil company, reported it could be weeks before it can restore the majority of its output at Abqaiq, one of the oil processing facilities that sustained damage in the attacks. The yield on 10-Year Treasuries declined three basis points to 1.82% and gold Climbed 0.30% to $1,503.08 an ounce.

The US and China are scheduled to meet early next month to continue trade talks. For the $250 billion worth of goods affected by tariffs so far, US imports from China are down 28% from a year ago. Relying on resources from other countries in an attempt to avoid supply disruptions, the US has made up less than a third of the shortfall. China has seemed less effected as their import supplies were more diversified. However, as a trade-surplus country, its economy suffers more as exports drop. The Federal Reserve reported that manufacturing production, which accounts for about 11% of the US economy, rose about 0.50% last month after a 0.40% drop in July. Total industrial production, which includes output at mines, and utilities, increased 0.60%, the most in a year as crude oil extraction rebounded after Hurricane Barry delayed drilling in the Gulf of Mexico a month earlier. Motor vehicles and parts production fell 1.00% last month, the most in four months, after increasing 0.50% in July. Oil and gas well drilling declined 2.50% last month, the fourth decline in the last five months. Total capacity utilization, which measures the amount of a manufacturing plant that is in use, rose to 77.90% from 77.50%.

The curve has bull-flattened with UST 10-Year yield down 3.14 bps.
This Week's Events
  09/16 Empire Manufacturing 05:30 Sep 4.00 2.00 4.80 -  
  09/17 Industrial Production MoM 06:15 Aug 0.20% 0.60% -0.20% -0.10%  
  09/17 Capacity Utilization 06:15 Aug 77.60% 77.90% 77.50% -  
  09/17 NAHB Housing Market Index 07:00 Sep 66.00 68.00 66.00 67.00  
  09/17 Net Long-term TIC Flows 13:00 Jul - - $99.10b -  
  09/17 Total Net TIC Flows 13:00 Jul - - $1.70b -  
  09/18 MBA Mortgage Applications 04:00 13 Sep - - 2.00% -  
  09/18 Housing Starts 05:30 Aug 1250k - 1191k -  
  09/18 Housing Starts MoM 05:30 Aug 5.00% - -4.00% -  
  09/18 Building Permits 05:30 Aug 1300k - 1336k 1317k  
  09/18 Building Permits MoM 05:30 Aug -1.30% - 8.40% 6.90%  
  09/18 FOMC Rate Decision (Upper Bound) 11:00 18 Sep 2.00% - 2.25% -  
  09/18 FOMC Rate Decision (Lower Bound) 11:00 18 Sep 1.75% - 2.00% -  
  09/19 Philadelphia Fed Business Outlook 05:30 Sep 10.50 - 16.80 -  
  09/19 Initial Jobless Claims 05:30 14 Sep 214k - 204k -  
  09/19 Continuing Claims 05:30 7 Sep 1672k - 1670k -  
  09/19 Bloomberg Consumer Comfort 06:45 15 Sep - - 63.20 -  
  09/19 Leading Index 07:00 Aug -0.10% - 0.50% -  
  09/19  Existing Home Sales 07:00 Aug 5.38m - 5.42m -  
  09/19 Existing Home Sales MoM 07:00 Aug -0.70% - 2.50% -  
  09/20 No Data - - - - - -
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