Daily Market Color

Treasurys Fall for Fifth Straight Day with Jobs Report on Horizon

US Treasurys posted declines for a fifth consecutive day, matching the longest streak since April, after markets received positive labor data that provided additional support for a 2016 Fed rate hike.  Initial jobless claims reported near historic lows with 249,000 for the week, below expectations of 256,000 and 5,000 fewer than the previous week.  The four-week moving average for new claims correspondingly shifted down to 253,500, a level that hasn’t been attained since December 1973.

With today’s market move, the yield on the two-year Treasury note sits at 0.85% (highest since June) while the ten-year Treasury is currently trading at a 3-week high of 1.74%.  Probabilities for a rate increase by the Fed are roughly 24% for November and 64% for December, however tomorrow’s release of nonfarm payrolls is clearly a wild card that could shift these expectations dramatically – one way or the other.

Prices of crude oil continued to rise following yesterday’s surprise fall in US inventory levels along with the continued hopes that the reported OPEC agreement to control supply will get put into action.  In the time since the deal was reached among OPEC members in September, oil has jumped over 12%.  The next official meeting between the major global oil producers is set for November 30th in Vienna, where investors are anticipating a more detailed plan on the supply reduction strategy.  WTI crude, up 1.25% on the day, traded above $50/barrel for the first time since June while Brent crude touched above $52.50/barrel.

The US dollar gained against most major currencies 0.5% on the day.  The dollar rose to a monthly high against the Japanese yen (104.13 Yen/$) while continuing to trade at its best level in 30 years against the sterling ($1.26/GBP).  Asian markets closed up on the day as the weaker yen boosted stocks while main European stock indexes finished down slightly as people to risk off ahead of the US payrolls release.

All three major U.S. stock indexes are nearly unchanged on the day while Treasury yields/swap rates are currently up 2-5 bps across the curve.

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