Daily Market Color

Treasury Rally Eases, Yields Come Off Five-Month Lows

US Treasurys gave back a portion of yesterday’s gains as yields/swap rates increased 1-5 bps across the curve.  The yield on the 10-year note currently resides near 2.21% while market expectations for a June rate hike by the Fed fell to below 50% after being above 65% just two weeks ago.  US stocks finished mostly lower on the day after rallying at the beginning of the session, led lower by energy shares whose values dropped after data from the EIA displayed a surprise build in gasoline inventories.  Crude oil prices also tumbled as much as 3.5% on the day, with WTI finishing near $50.60/barrel and Brent falling to $53.10/barrel.  The only meaningful US economic data on the day was the release of the Fed’s beige book, which detailed central bank member views of “modest to moderate” expansion in the economy.  The report acknowledged both a tightening of the labor market and rising inflation, but with neither accelerating at paces which would correspond with the levels of recently reported data which see consumer and business confidence near all-time highs. 

Abroad, British Prime Minister Theresa May gained lawmaker approval for the proposed June 8th snap election, following a 522 to 13 vote by the House of Commons.  May had previously not been calling for a national vote until 2020, but in an effort to strengthen her hand in negotiations with the European Union on behalf of Great Britain, she opted to accelerate the process.  From an election perspective, the current time is ideal for PM May, as the popularity of her main opposition (Labour Party) is at its lowest level in years.  Still remaining in the spotlight regarding other international market activity, is the French presidential election set for this Sunday, where the most recent polls display Independent Emmanuel Macron maintaining a lead and helping to keep market volatility under control for the time-being.

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