Daily Market Color

Safe Haven Assets Continue to Rise Amid U.S-Iran Tensions


Rates and equities continue to slide as tensions between U.S. and Iran escalate further. U.S. Treasury yields and swap rates are mixed to start the week after falling as much as 8 basis points on Friday. U.S. equity futures also point to another risk-off day for markets following an inflammatory weekend in which Iran said they would enrich uranium “without limitation,” and President Trump suggested the U.S. would target sites of cultural importance if Iran retaliates. As a result, the 10-year Treasury yield now sits at 1.78% and crude oil topping $70/barrel while other haven assets like gold have hit 6-year highs.



Fed minutes show confidence in projected interest rate path for 2020. Fed officials believe there is still slack in the labor market and that conditions could continue to improve without producing undesirable inflation, according to the latest FOMC minutes released on Friday. The Fed also discussed the measures it has enacted to enhance liquidity in short-term funding markets and discussed the possibility of reducing its daily market operations sometime after the April tax season. Thus far, the Fed has succeeded in preventing a repeat of September’s spike in short-term rates but will now be under pressure to provide a permanent solution.



Week ahead. The Markit Composite and Services PMI’s will both be released at 9:45 ET this morning. Current forecasts call for an increase in both indicators, suggesting continued optimism among private sector firms. Fed officials Lael Brainard, Neel Kashkari and John Williams will speak on Wednesday and Thursday. 2020’s first jobs report will round out the week on Friday.


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