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Market Commentary

Market Commentary


Today's Coupons
  10-Year Notes   99-05.5 (-12.5)  
  FN 2.5% Coupon   105-01.5 (-02.5)  
  Support   0.791%  
  Resistance   0.615%  
  Wednesday, December 23, 2020

Treasury Yields Rise as Personal Income and Spending Fall

Market opened today's session with treasuries lower across all maturities. 10-Year Treasury yield is at 0.9629, 4.65 bps increased from prior closing of 0.9164.
US stocks opened slightly higher this morning following demands by US President Donald Trump to increase stimulus checks from $600 to $2,000. House Speaker Nancy Pelosi signalled the House would push to include the stimulus check increase in a pro forma session on Thursday. In Europe, the pound rose after trade and transportation links opened once again between the UK and EU as negotiators worked on reaching a Brexit deal. Elsewhere WTI crude and Gold both recorded slight increases of 0.8% and 0.4%, respectively. On the economic front, MBA Mortgage Applications decreased slightly from a week prior, after reporting an increase of 0.80% for week-end December 18. Notably, purchases were down by 4.60% while Refis increased by 3.80%, with refis accounting for 74.80% of all loans. The average 30 year rate stood at 2.86%. New Home Sales for the month of November failed to beat expectations after reporting at 841K. Reporting at the lowest level since June, single-family home purchases decreased by 11%, potentially reflecting a lack of available inventory selling at surging prices, all thanks to record low interest rates. Notably, at the current sales pace, it would take 4.1 months for inventory to be exhausted, the highest level since June. Elsewhere, Initial Jobless Claims lowered to 803K for the week ending December 19. Additionally, Continuing Claims decreased by 170K for the week ending December 12, with the states of California and New York contributing the most to the drop in claims. Personal Income and Spending both decreased more than expected for the month of November, reporting drops of 1.1% and 0.4%, respectively. With payrolls remaining at 9.8mm below their pre-crisis peak, today's weak income reports can be attributed to the expiration of federal stimulus programs. Even with the Fed's assistance, price pressure will remain in a disinflationary state until the labour market further recovers.
The curve has bear-steepened with UST 10-Year yield up 4.65 bps.
This Week's Events
  12/21 Chicago Fed Nat Activity Index 05:30 Nov 0.75 0.27 0.83 1.01  
  12/22 GDP Annualized QoQ 05:30 3Q T 33.10% 33.40% 33.10% -  
  12/22 GDP Price Index 05:30 3Q T 3.60% 3.50% 3.60% -  
  12/22 Conf. Board Consumer Confidence 07:00 Dec 97.00 88.60 96.10 92.90  
  12/22 Richmond Fed Manufact. Index 07:00 Dec 11.00 19.00 15.00 -  
  12/23 MBA Mortgage Applications  04:00 18 Dec - 0.80% 1.10% -  
  12/23 PCE Deflator MoM 05:30 Nov 0.10% 0.00% 0.00% -  
  12/23 PCE Deflator YoY 05:30 Nov 1.20% 1.10% 1.20% -  
  12/23 Initial Jobless Claims 05:30 19 Dec 880k 803k 885k 892k  
  12/23 Continuing Claims 05:30 12 Dec 5560k 5337k 5508k 5507k  
  12/23 Durable Goods Orders 05:30 Nov P 0.60% 0.90% 1.30% 1.80%  
  12/23 U. of Mich. Sentiment 07:00 Dec F 81.10 80.70 81.40 -  
  12/24 Bloomberg Consumer Comfort 06:45 20 Dec - - 48.40 -  
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