Rates and Stocks Set to Bounce Higher as China is Said to be Open to Limited Trade Deal

 

Trade seesaw continues. High-level US/China trade talks are set to continue tomorrow after concerns around the viability of a trade deal sent rates and stocks lower yesterday. However, this morning futures and rates are bouncing back amid news that China is open to a limited deal, provided the US poses no additional tariffs. In return, China would boost purchases of US agricultural goods. The 10-year Treasury yield is sitting 2.2 basis points higher this morning at 1.55%- 4 basis points higher than where it started the week.

 

 

“It isn’t QE.” Fed Chair Powell outlined the Fed’s plan to purchase additional Treasury securities to ease short-term funding pressures in overnight funding markets. Powell characterized the spike in short-term rates as “technical” and added that the Fed’s purchases of additional securities to alleviate funding pressures shouldn’t be interpreted as quantitative easing. Whether the additional liquidity resolves the funding crunch remains to be seen, but the market will likely get additional clarity this afternoon when the Fed’s minutes from it’s September meeting are released.

 

 

Day ahead. Today’s highlight will be the FOMC meeting minutes release at 2:00 ET. Wholesale inventories for the month of August will come out at 10:00 ET, while Jerome Powell will speak again today at 11:00 as he co-hosts a roundtable discussion with Kansas City Fed President Esther George.