Rates Decline After $109B Onslaught of Treasury Issuance

Swap rates and Treasury yields fall after $109B of UST auctions. Today’s $55B auction of 5y bonds and $54B auction of 2y bonds were met with mixed demand. Demand was stronger for the 5y auction, which contributed to the 6-8bp rate decline across the curve. Lower-than-expected new home sales in October and a downward revision for September also contributed, as the data diminished housing market sentiment. Meanwhile, upcoming data (PCE, GDP, personal income, and personal spending) and Fed commentary from Chair Powell on Friday could provide a volatile week.

Gas prices decline for 60-straight days. Costs at US gas pumps have fallen for 60 consecutive days, the longest streak in more than 1-year. The average cost of one gallon of gas has declined 60 cents since mid-September to $3.25, which is also ~30 cents cheaper than this time last year. Gas prices are expected to keep falling in line with crude oil prices, the most significant driver. Crude oil prices declined for a third-straight day, as oversupply signals outweighed the impact of further OPEC production cuts at their meeting this Thursday.

A global central bank roundup: rate cuts still seen as premature. Global sentiment has shifted over the past month as central bank rate pauses have seen discussions shift toward the timeline for rate cuts. However, many central bank leaders warned that the discussions are premature, including Chair Powell, who maintained “the fact is, the Committee is not thinking about rate cuts right now at all.” A similar sentiment was echoed by the ECB after President Lagarde stated that the ECB has “already done a lot”, as policymaker De Cos stated, “It is absolutely premature to start talking about interest rate cuts.” Meanwhile, BOE Governor Andrew Bailey suggested today that interest-rate cuts are unlikely for the “foreseeable future.”