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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   98-30.5 (+04)  
  FN 3.5% Coupon   102-12.5 (+01)  
  Support   3.237%  
  Resistance   1.529%  
Friday, October 18, 2019
Treasury Yields Slightly Higher - British Bankers Swindle Billions in Trading Scheme
Market opened today’s session with treasuries flat across all maturities. The 10-Year Treasury yield is currently at 1.7536, 0.18 bps increased from prior closing of 1.7518.

US stock futures were little changed this morning, the Dow Jones pointed to a gain of just 20 points at the open, the S&P 500 and Nasdaq 100 futures also indicated small changes. Around 70 S&P 500 companies reported third-quarter earnings this week. Of those companies, more than 80% have posted results that were better than what was expected. Optimism around the potential Brexit deal also gave stocks a boost this week. The Dow Jones was up 0.8% for the week through Thursday’s close. The S&P 500 and Nasdaq Composite were up 0.9% and 1.2%, respectively. China posted its weakest pace of expansion in nearly 30 years; China’s economy grew just 6% in the third quarter as the US-China trade war hit demand at home and abroad. China’s US dollar-denominated exports fell 3.2% in September from a year ago, while imports dropped 8.5% during the same period. An initial trade deal has been negotiated and will require the Chinese purchase between $40 billion to $50 billion worth of American farm products, address concerns related to intellectual property theft, and currency manipulation. China has yet to confirm if this initial offer will be accepted, but states that tariffs will need to be withdrawn in order for them to consider moving forward with negotiations. The US Treasury will auction $45 billion in three-month bills and $42 billion in six-month bills on October 21st.

Two former British investment bankers are on trial in Germany for their part in an equity trading scheme between 2006 and 2011, which pocketed hundreds of millions of dollars from taxpayers. The German press has called it the most complicated tax fraud trial in modern German history and could have implications for the entire financial services industry. The two investment bankers, Martin Shields and Nicholas Diable, exploited a legal loophole which allowed two parties to simultaneously claim ownership of the same shares, which allowed them both to claim double the tax rebates to which they were not entitled; they are currently facing 24 counts of tax fraud. The trading scheme orchestrated by the two British bankers led to tax loss of €400 million ($443 million). However, the wider scheme is thought to have cost banks across Europe, including at least 10 countries outside of Germany, over $60 billion. According to the German Finance Ministry, approximately 500 deals, worth around €5.5 billion, are being investigated in Germany; an estimated €2.4 billion has already been recovered by the tax authorities.

The curve has bear-steepened with the UST 10-Year yield up 0.18 bps from prior closing.
This Week's Events
  10/15 Monthly Budget Statement 11:00 Sep $83.00b - $119.10b -  
  10/16 MBA Mortgage Applications 04:00 11 Oct - 0.50% 5.20% -  
  10/16 Retail Sales Advance MoM 05:30 Sep 0.30% -0.30% 0.40% 0.60%  
  10/16 NAHB Housing Market Index 07:00 Oct 68.00 71.00 68.00 -  

U.S. Federal Reserve Releases Beige


11:00 - - - - -  
  10/16 Net Long-term TIC Flows 13:00 Aug - -$41.10b $84.30b $83.80b  
  10/16 Total Net TIC Flows 13:00 Aug - $70.50b $43.80b $43.30b  
  10/17 Initial Jobless Claims 05:30 12 Oct 215k 214k 210k -  
  10/17 Continuing Claims 05:30 5 Oct 1675k 1679k 1684k 1689k  
  10/17 Housing Starts 05:30 Sep 1320k 1256k 1364k 1386k  
  10/17 Housing Starts MoM 05:30 Sep -3.20% -9.40% 12.30% 15.10%  
  10/17 Building Permits 05:30 Sep 1350k 1387k 1419k 1425k  
  10/17 Building Permits MoM 05:30 Sep -5.30% -2.70% 7.70% 8.20%  
  10/17 Philadelphia Fed Business Outlook 05:30 Oct 7.60 5.60 12.00 -  
  10/17 Capacity Utilization 06:15 Sep 77.70% 77.50% 77.90% -  
  10/17 Bloomberg Consumer Comfort 06:45 13 Oct - 63.50 62.70 -  
  10/18 Leading Index 07:00 Sep 0.00% -0.10% 0.00% -0.20%
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