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Treasury Yields Rise on Strong GDP Data

Full Steam Ahead in the US Economy

The Commerce Department’s second estimate of Q3 GDP headlined today’s economic data releases, where a 0.3% upward revision to the first estimate signaled the US economy performing at closer to its full potential.  GDP in the third quarter expanded at a 3.3% annualized rate, its best in three years, underpinned by robust business investment (+10.4% pace) despite growth in consumer spending slowing from the previous quarter.  The 3.3% Q3 pace exceeds the maximum sustainable level of output, as per the nonpartisan Congressional Budget Office, a level which would imply an overheating of the economy if the growth acceleration continues.

 

 

US Treasurys sold off from the beginning of the trading session in sympathy with a European bond market decline, and yields/swap rates are currently trading 2-7 bps higher across the curve.  The 10-year note yield touched as high as 2.39% – its highest level in two weeks.  US equity markets were mixed on the day, with bank stocks (+3%) rallying for a second straight trading session while technology shares dragged the Nasdaq down more than 1.25%.  In commodities, crude futures edged 1% lower ahead of OPEC’s two day meeting set to commence tomorrow in Vienna.  WTI crude is currently trading at $57.45/barrel.  

 

 

Brexit Negotiations Make Progress

Across the pond, negotiators from the EU and Great Britain reached a preliminary agreement on the fees that the UK will pay as a result of its divorce from the EU.  While the deal will still need to be approved by England and the EU, the progress is a positive sign for Brexit talks, where several trade covenants and the controversial situation surrounding the Irish border still need to be ironed out.  The British pound rallied to a two-month high following the news, up 0.5% to $1.34/GBP.

 

 

Step Right Up and Ride the Bitcoin Ride

For a “currency” that has been particularly volatile in a comparatively stable financial market environment, today was no exception.  Bitcoin surged to a new record high of $11,434 intraday, after crossing the $10,000 mark for the first time overnight and recording a 20% rally in the past four days.  Within hours of hitting its peak, the cryptocurrency tumbled nearly 20% as investors began to take profits amid a number of service delays within certain online exchanges.  Bitcoin has since rallied back and is currently trading just above flat for the session.  Overall, bitcoin is up more than 1,000% on the year, as several derivative markets are getting set to begin to open trading on the bitcoin’s perceived market value. 

 

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