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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   100-29.5 (+08.5)  
  FN 3.5% Coupon   102-25 (+00.5)  
  Support   3.237%  
  Resistance   1.514%  
Tuesday, October 08, 2019
Treasury Yields Decline Amidst New Tariffs and Obstructions of Congressional Investigations
Market opened today’s session with treasuries rallying across all maturities. 10-Year Treasury yield is at 1.5136, 4.44 bps decreased from prior closing of 1.5580.

This morning the Dow Jones dropped 254 points, the S&P 500 fell 0.8% along with the Nasdaq Composite. Bank shares for Citigroup, Bank of America, and JP Morgan Chase declined more than 1% each today. As trade negotiations between the US and China are scheduled to resume October 10th, the US expanded its trade blacklist to include some of Chinas top artificial intelligence firms; Chinas foreign ministry said it would be retaliating against the blacklist expansion. The US has scheduled a tariff increase to commence October 15th from 25% to 30% on $250 billion worth of Chinese goods. The Trump administration commented that the tariff increase will take effect if no progress is made during trade negotiations. US product prices posted their biggest monthly drop in more than four years due to lower costs for goods and services, the trade war being a key contributor. Producer prices serve as an indicator of inflation, and a decline could give the Federal Reserve more room to ease monetary policy. The yield on 10-Year Treasuries decreased five basis points to 1.51%. The US Treasury will offer $38 billion at its auction of three-year notes, the same amount as the last offering.

The US-China trade war worsened in September after a new 15% tariff on $112 billion worth of Chinese products was enforced. The new tariffs, along with the tariffs in December that will affect $160 billion worth of goods, have a more direct impact on US consumers. Producer prices excluding food, energy, and trade services were unchanged from the prior month, and rose 1.70% from a year earlier. The cost of goods decreased 0.40% after dropping 0.50% the previous month. Services prices declined 0.20% after a 0.30% gain in August. Energy prices fell 2.50% from the previous month, while food costs rose 0.30%. As the impeachment inquiry into Trump moves forward, the Trump administration - via the State Department, ordered Gordon Sondland, the ambassador to the European Union, not to appear for a scheduled deposition with House committees. Ambassador Sondlands text messages with other US diplomats were released last week after they were given to the House Representatives Joint Committee by former US Special Envoy to Ukraine, Kurt Volker, during his own deposition. The House Intelligence Committee Chairman Adam Schiff reported that the State Department had also blocked Ambassador Sondland from sharing documents related to the impeachment inquiry.

The curve has bull-flattened with UST 10-Year yield down 4.44 bps.
This Week's Events
  10/07 Monthly Budget Statement 11:00 Sep $96.50b - $119.10b -  
  10/07 Consumer Credit 12:00 Aug $15.000b $17.901b $23.294b $23.046b  
  10/08 NFIB Small Business Optimism 03:00 Sep 102.00 101.80 103.10 -  
  10/08 PPI Final Demand MoM 05:30 Sep 0.10% -0.30% 0.10% -  
  10/08 PPI Final Demand YoY 05:30 Sep 1.80% 1.40% 1.80% -  
  10/09 MBA Mortgage Applications 04:00 4 Oct - - 8.10% -  
  10/09 JOLTS Job Openings 07:00 Aug 7250 - 7217 -  
  10/09 Wholesale Trade Sales MoM 07:00 Aug - - 0.30% -  
  10/09 Wholesale Inventories MoM 07:00 Aug F 0.40% - 0.40% -  
  10/09 FOMC Meeting Minutes 11:00 18 Sep - - - -  
  10/10 CPI MoM 05:30 Sep 0.10% - 0.10% -  
  10/10 CPI YoY 05:30 Sep 1.80% - 1.70%    
  10/10 Initial Jobless Claims 05:30 5 Oct 220k - 219k -  
  10/10 Continuing Claims 05:30 28 Oct 1651k - 1651k -  
  10/10 Bloomberg Consumer Comfort 06:45 6 Oct - - 62.00 -  
  10/11 Import Price Index MoM 05:30 Sep 0.00% - -0.50% -  
  10/11 Import Price Index YoY 05:30 Sep -2.10% - -2.00% -  
  10/11 Export Price Index MoM 05:30 Sep -0.10% - -0.60% -  
  10/11 Export Price Index YoY 05:30 Sep - - -1.40% -  
  10/11 U. of Mich. Sentiment 07:00 Oct P 92.00 - 93.20 -
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