Daily Market Color

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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