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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   100-18.5 (-06.5)  
  FN 3.5% Coupon   102-22 (-02)  
  Support   3.237%  
  Resistance   1.529%  
Wednesday, October 09, 2019
Treasury Yields Increased: China Prepared to Accept Partial Trade Deal
Market opened today’s session with treasuries lower across all maturities. 10-Year Treasury yield is at 1.5562, 2.73 bps increased from prior closing of 1.5289.

The Dow Jones climbed 200 points, or 0.7%, the S&P 500 gained 0.8%, and the Nasdaq Composite advanced 0.9%; the gains are the indexes first in three sessions as worries around trade negotiations have dented investor confidence. Optimism around the upcoming trade talks between the US and China has increased as China reported they are prepared to accept a partial trade deal as long as no more tariffs are imposed by Trump. China also added that they would be offering to increase purchases of US agricultural products in order to reach a partial deal. On Tuesday, the Department of Commerce added 28 new companies and agencies to its “blacklist” of Chinese companies banned from doing business in the United States. The yield on 10-Year Treasuries and 2-Year Treasuries increased three basis points to 1.56% and one basis point to 1.43%, respectively. The US Treasury will offer $24 billion at its monthly auction of 10-Year notes, the same as the last offering. White House officials continue to obstruct the House Representatives investigation into Trump’s attempt to influence the next election. The White House said that it would not cooperate, claiming the proceedings amount to “baseless, unconstitutional efforts to overturn the democratic process”. White House counsel, Pat Cipollone, sent an eight page letter to House Speaker Nancy Pelosi, House Intelligence Chairman Adam Schiff, Oversight Chairman Elijah Cummings, and Foreign Affairs Chairman Eliot Engel which stated, “You have designed and implemented your inquiry in a manner that violated fundamental fairness and constitutionally mandated due process”. Cipollone’s letter came hours after the White House blocked a key witness in the impeachment probe from testifying and sharing documents behind closed doors before the House panels.

PG&E has intentionally cut power to more than 500,000 customers in Northern California and that it plans to gradually turn off electricity to nearly 800,000 customers to prevent its equipment from starting another wildfire during hot, windy weather. A second group of about 234,000 customers will lose power starting at noon. The cutbacks followed a plan instituted after deadly wildfires destroyed dozens of lives and thousands of homes and forced PG&E into bankruptcy over an estimated $30 billion in potential damages from lawsuits. Gusts of 35 mph - 45 mph winds were forecast to sweep across the state, from the San Francisco Bay Area to the agricultural Central Valley and in the Sierra Nevada foothills. The California Department of Forestry and Fire Prevention said it increased staffing in preparation for extreme fire weather. PG&E commented that “it could take as many as five days to restore power after the danger has passed because every inch of power line must be checked to make sure it isnt damaged or in danger of sparking a blaze”. Following in PG&E’s footsteps, Southern California Edison said more than 106,000 of its customers could face power cuts as early as Thursday as Santa Ana winds loomed.

The curve has bear-steepened with UST 10-Year yield up 2.73 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 - 5.20% 8.10% -  
  10/09 JOLTS Job Openings 07:00 Aug 7250 7051 7217 7174  
  10/09 Wholesale Trade Sales MoM 07:00 Aug - 0.00% 0.30% 0.20%  
  10/09 Wholesale Inventories MoM 07:00 Aug F 0.40% 0.20% 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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