Daily Market Color October 17, 2016Fed Comments in Focus While Treasurys Rebound After Tepid Manufacturing Data US markets opened the week focused on comments made by Federal Reserve Vice Chair Stanley Fischer, who acknowledged that the current economy is “very close” to the Fed’s dual employment and inflation targets, but he stressed the importance of fiscal policy (implicitly the limitations of monetary policy) in helping the country achieve these long term economic goals. Fischer indicated a belief that fiscal policy changes could more effectively address signs of slowing growth and exports, and other symptoms of lackluster US economic growth vs. continuing to maintain a short term Fed rate policy near 0%. Additionally, he argued that if borrowing rates remain at low levels, it would be increasingly difficult for central banks worldwide to effectively combat future recessions. On the data front, US industrial production rose 0.1% in September, matching expectations and recovering from a revised decline of -0.5% in the previous month. Total production, highlighted by a 0.2% gain at factories and 0.4% mining increase, has now risen for the third time in the last four months, as volatility in energy prices and the US dollar has diminished. The year-on-year industrial production, however, is down 1.0% while manufacturing is flat overall over the past year. Treasury prices rebounded from a four-month low while the US dollar fell on the day, as investors reacted to the tepid manufacturing data and look ahead for consumer price data to be released tomorrow morning. Abroad, German government yields rose to their highest levels since June with the ECB set to meet on Thursday of this week, where discussions surrounding the tapering of the current bond-buying program will be heavily scrutinized. The yield on the 10-year Bund moved out of negative territory in October, up 20 bps for the month, as it closely tracked the uptick in US and UK bond yields. Equity markets in both Europe and Asia were mostly lower today, displaying caution ahead of the ECB meeting along with a slew of economic data due in China throughout the week. All three major U.S. stock indexes finished down roughly 0.3% on the day, while Treasury yields/swap rates fell 2-4 bps across the curve. Both Brent and WTI crude oil trimmed 0.5% during the session, leaving WTI just above $50/barrel and Brent at $51.7/barrel.