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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   98-31 (+07.5)  
  FN 3.5% Coupon   102-11.5 (+02.5)  
  Support   3.237%  
  Resistance   1.529%  
Wednesday, October 23, 2019
Treasury Yields Decline: Trump Diverts Billions from Military for Border Wall
Market opened today’s session with treasuries rallying across all maturities. The 10-Year Treasury yield is currently at 1.7397, 2.10 bps decreased from prior closing of 1.7607.

US stock futures showed little change as investors reviewed earnings reports from Caterpillar and Boeing. Caterpillar said it earned $2.66 per share in the third quarter, down from the anticipated $2.88 per share; revenue came in at $12.758 billion, while Wall Street expected revenue of $13.572 billion. Meanwhile, Boeing shares climbed 1.5% after the airplane maker said it would stick to its timeline for the return of the 737 Max. Of the 118 S&P 500 companies that have reported earnings, 81% have posted results that exceeded investor expectations. The Dow Jones traded 2 points lower, but indicated a gain of about 15 points at the open. Futures on the S&P 500 fell slightly while the Nasdaq 100 remained almost flat. UK lawmakers voted in favor of Prime Minister Boris Johnson’s Brexit agreement, but rejected his request to fast-track legislation to take the country out of the European Union by the end of the month. The Stoxx Europe 600 Index slipped 0.1%. The yield on 10-Year Treasuries fell two basis points to 1.74%. Britain’s 10-Year yield fell three basis points to 0.683%, while the British pound rose 0.2% to $1.2893. The US Treasury will offer $41 billion at its 5-year notes auction, the same amount as the last offering. The US Treasury will also offer $20 billion in 2-year floating rate notes next week.

Boeing stated that it expects their 737 Max planes to obtain regulatory approval to fly again before the end of the year, but advised that production costs are currently rising. Production costs for the 737 Max rose by $900 million in the third quarter, in addition to the $2.7 billion in extra costs it incurred earlier this year. In July, Boeing took a $4.9 billion after-tax charge to compensate airlines and other customers affected by the grounding, which took place in March after two crashes killed 346 people. Mortgage applications to purchase a home fell 4% for the week, but were 6% higher compared to the same week one year ago. According to the National Association of Realtors, home prices in September saw the biggest annual jump in nearly two years. Consequently, sales fell more than expected. Last week, Congress failed to override Trump’s veto of a measure blocking his national emergency declaration over the southern border. Both Democrats and Republicans have accused Trump of “overreaching and disregarding Congress’ power of the purse” by declaring the national emergency. On Friday, a federal judge ruled that Trump violated the law by using the declaration to divert an additional $3.6 billion to wall construction. The additional money came from the military construction budget, along with money from other administration sources.

The curve has bull-steepened with the UST 10-Year yield down 2.10 bps from prior closing.
This Week's Events
  10/21 No Data - - - - - -  
  10/22 Richmond Fed ManufactIndex 07:00 Oct -7.00 8.00 -9.00 -  
  10/22 Existing Home Sales 07:00 Sep 5.45m 5.38m 5.49m 5.50m  
  10/22 Existing Home Sales MoM 07:00 Sep -0.70% -2.20% 1.30% 1.50%  
  10/23 MBA Mortgage Applications 04:00 18 Oct - -11.90% 0.50% -  
  10/23 FHFA House Price Index MoM 06:00 Aug 0.30% 0.20% 0.40% -  
  10/24 Initial Jobless Claims 05:30 19 Oct 215k - 214k -  
  10/24 Continuing Claims 05:30 12 Oct 1678k - 1679k -  
  10/24 Durable Goods Orders 05:30 Sep P -0.70% - 0.20% -  
  10/24 Durables Ex Transportation 05:30 Sep P -0.20% - 0.50% -  
  10/24 Bloomberg Consumer Comfort 06:45 20 Oct - - 63.50 -  
  10/24 Markit US Manufacturing PMI 06:45 Oct P 50.90 - 51.10 -  
  10/24 Markit US Services PMI 06:45 Oct P 51.00 - 50.90 -  
  10/24 Markit US Composite PMI 06:45 Oct P - - 51.00 -  
  10/24 New Home Sales 07:00 Sep 702k - 713k -  
  10/24 New Home Sales MoM 07:00 Sep -1.60% - 7.10% -  
  10/24 Kansas City Fed ManfActivity 08:00 Oct -3.00 - -2.00 -  
  10/25 U. of Mich. Sentiment 07:00 Oct F 96.00 - 96.00 -
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