Market Snapshot March 14, 2019

white house

Good Thursday A.M.,


Great overview from Doug Wilken… Yesterday the 10-year yield closed at 2.625% versus a Tuesday close of 2.60%. The slight worsening came after news that the British Parliament voted to reject a proposal of leaving the European Union without a Brexit deal. The Dow gained 148 points and MBS worsened 9 bps.


The yield this morning is bouncing around 2.62% and continues in a holding pattern with reports and news regarding a slowing job market, low inflation, slowing China economic conditions and global issues with Brexit and a delay in the U.S. China trade meeting all reinforcing the patient stance from the Fed.


Data overnight showed China industrial output expanded at the slowest rate in 17 years and the U.S. Labor Department released a report this morning showing a continued trend with February import prices falling 1.3% over past year.


The Labor Department also released weekly jobless data showing an increase in weekly claims that exceeded forecasts. The four-week average decreased slightly.


Sales of new homes in January decreased to a 607,000 annualized level as reported by the Census Bureau and Department of Housing and Urban Development. The annual level was below forecast and December sales of 652,000. Properties sold with construction not started fell to lowest in three months and the projected time for inventory decreased slightly. This January data was released two weeks after the December report with February data scheduled for March 29.


Yesterday the Commerce Department released a report on construction spending showing a 1.3% increase in January, exceeding forecast for 0.4% increase and the largest increase since April 2018. The increase follows a revised 0.8% decrease in December. The February construction spending report will be published on April 1 as scheduled.


The 10-year yield is bouncing around a 2.62% floor of a general consolidation since mid-December with the yield maintaining a 2.62% to 2.80% range with 2.70% being a pivot point. The yield curve is basically flat out to 5-year Treasuries and then with modest increase in yields out to 30-year. The Fed patience has established the low end of the curve with a current anchoring and future movement at the long end influenced by economic data.


From here, the risk is that Theresa May wins over enough support to get MV3 through parliament (the 3rd compromise deal, designed to avoid the “no-deal” Brexit that lawmakers voted down last night).  If that happens, it will be “risk-on” for markets (i.e. bond yields will move higher).  This will be a bigger deal for British financial markets, but US markets will definitely get some spillover.


Make today great!