Daily Market Color February 23, 2016PBoC’s Surprise Yuan Devaluation Sparks Sell Off in Risk Assets US Stocks declined with oil while Treasuries rallied marginally across the curve after the People’s Bank of China unexpectedly lowered the fixing rate on the yuan by the most in six weeks. The move serves are a reminder that despite the relative calm of financial markets in recent weeks, the world’s second largest economy still faces significant headwinds that impact the global growth outlook. WTI crude fell nearly 5% as investors digested the implications of the PBoC’s move and on speculation that Iran could hold up a Saudi/Russia-led production agreement. Iran’s oil minister called the proposal “ridiculous” because it caps production while Iran is still ratcheting up output following the removal of sanctions. Tehran will likely require a special carve out in production restrictions in order to support an agreement. US economic data released today painted a mixed picture of the US economy. An unexpected increase in existing home sales in January and a rise in home prices suggest the housing sector continues to expand, supported by a tightening labor market. The home resales print was a six-month high and the second fastest pace of growth since 2007. The positive housing data comes off the back of stronger-than-expected retail sales, industrial production, and employment data, suggesting that recent fears of a US recession are overblown. The Conference Board’s consumer confidence index, however, fell to 92.2 (a seven-month low) from a reading of 97.8 in January. The psychological effects of recent stock market volatility appear to be weighing on the consumer, which could have implications for the broader economy going forward. There is a $26 billion 2-year note auction at 1pm and Fed Vice Chair Fischer speaks on monetary policy this evening. All three major US stock indexes are down 1% while Treasury yields and swap rates are down 1-2 bps across the curve.