Daily Market Color January 9, 2018Risk Assets Continue to Climb Higher Treasury Yields Surge The yield on the 10-year Treasury note soared past 2.50% early in today’s trading session, breaking a technical resistance level which hadn’t been breached since March 2017. Overall, yields/swap rates increased 1-9 bps across the curve, bringing the 10-year yield to its current mark of 2.55%, only 7 bps away from a fresh 3.5-year high. A portion of the movement was attributable to an overnight announcement from the Bank of Japan, which stated its intention to purchase smaller quantities of long-dated bonds and led investors to consider the possibility of the central bank tapering its ultra-loose monetary stimulus program. Following the announcement, the US dollar declined 0.5% against the Japanese yen while the yields on 20- and 40-year JBG’s increased to their highest levels of the month. In equity markets, all three major US stock indices climbed to new record highs, boosted by shares in banks (+0.8%) which rose in line with the surge in Treasury yields. The S&P 500 (+0.15%) and Nasdaq (+0.1%) have now posted their sixth consecutive session of increases. Investor sentiment was also helped by news of apparently congenial talks between South and North Korean officials, the first such occurrence in more than two years. Crude Oil Climbs to Three-Year High WTI crude futures traded at their highest levels since December 2014, settling up 1.9% on the day to $62.90/barrel, after a Bloomberg report revealed crude stockpiles at the Cushing, Oklahoma pipeline hub declining by 1.5 million barrels last week. The reduction would further tighten US supply, which is already near a three-year low following a decline during the week ending December 29th. The price of Brent crude is now approaching $70/barrel – a level which several OPEC officials fear may overheat the market and spur increased output in America. Job Openings Weaken, But Remain Strong The Labor Department’s JOLTS report headlined an otherwise light day of economic releases. Job openings during November fell for a second consecutive month to 5.879 million (6.025 million expected), albeit remaining within levels associated with a healthy labor market, while the number of hirings declined almost 2% to 5.49 million. Openings in construction and retail displayed the greatest increases, while the manufacturing and real estate sectors posted monthly reductions. Also detailed in the report, the quits rate, an often-referenced measure of confidence in the jobs market, rose a steady 2.2% for the third consecutive month as 3.17 million Americans quit their job during November.
