|10-Year: +8/32....2.376%.... GNMAs: .... USD/JPY: 113.39.... EUR/USD: 1.1794|
-- Cautious overnight session boosts Treasuries
-- October NFIB Small Business Optimism Index (actual: 103.8; prior: 103.0)
-- October PPI (actual: +0.4%; Briefing.com consensus: 0.1%; prior: 0.4%) and core PPI (actual: +0.4%; Briefing.com consensus: 0.2%; prior: 0.4%)
Long End Climbs
- U.S. Treasuries ended Tuesday on a higher note with longer-dated issues recording solid gains while the 2-yr note spent the bulk of the day in negative territory, but turned positive ahead of the close. This led to another day of curve flattening, as the 2s10s spread narrowed by a basis point to 70 bps after compressing to 68 bps intraday. Treasuries saw some selling in response to a hotter than expected October PPI (actual: 0.4%; Briefing.com consensus: 0.1%), but that move was reversed promptly. The advance in U.S. Treasuries took place alongside gains in European debt while Chinese debt remained pressured, briefly lifting China's 10-yr yield above 4.00% for the first time since 2014. Junk bond prices struggled again, sending the iShares iBoxx High Yield Corp Bond ETF (HYG 86.69, -0.36) down 0.4%, beneath Thursday's intraday low.
- Yield Check:
- 2-yr: -1 bp to 1.68%
- 5-yr: UNCH at 2.07%
- 10-yr: -2 bps to 2.38%
- 30-yr: -3 bps to 2.84%
- Atlanta Fed President (2018 FOMC voter) Raphael Bostic spoke in favor of gradual rate hikes, noting he expects economic growth slightly above 2.0%, little change in unemployment and modest wage growth
- The Wall Street Journal reported that President Trump is considering Allianz chief economic adviser Mohamed El-Erian as a candidate for the vice chairman of the Federal Reserve. Mr. El-Erian previously served as a deputy director at the International Monetary Fund.
- The October PPI report revealed a 0.4% increase in the index for final demand (Briefing.com consensus +0.1%) and a 0.4% increase in the index for final demand less foods and energy, also known as "core PPI" (Briefing.com consensus +0.2%).
- The key takeaway from the report is that it will create some angst about possible pass-through effects on consumer prices and will help solidify expectations for a December rate hike from the Federal Reserve.
- The NFIB Small Business Optimism Index increased to 103.8 in October from 103.0 in September
- WTI crude: -1.9% to $55.70/bbl
- Gold: +0.3% to $1283.30/ozt
- Copper: -1.6% to $3.07/lb
- EUR/USD: +1.1% to 1.1791
- USD/JPY: -0.2% to 113.40
- Data out Wednesday:
- Weekly MBA Mortgage Index at 7:00 ET (prior: 0.0%)
- October CPI (Briefing.com consensus: 0.1%; prior: 0.5%), core CPI (Briefing.com consensus: 0.2%; prior: 0.1%), October Retail Sales (Briefing.com consensus: 0.1%; prior: 1.6%), Retail Sales ex-auto (Briefing.com consensus: 0.2%; prior: 1.0%) at 8:30 ET
- September Business Inventories (Briefing.com consensus: 0.0%; prior: 0.7%) at 10:00 ET
- Weekly crude inventories (prior: +2.2 mln) at 10:30 ET
- November Net Long-Term TIC Flows (prior: $67.20 billion) at 16:00 ET