Daily Market Color September 6, 2016Treasurys Rally as Economic Data Continues to Disappoint The big driver of market action today in U.S. markets was the ISM Non-Manufacturing Index, which came in with an August reading of 51.4, significantly below the expectation of 54.9. July’s index was 55.5, making this month’s 4.1 point fall the largest since the 2008 financial crisis. Drops in the new orders and business activity indexes were reported as the main contributors to the decline. Building off the less-than-robust labor and manufacturing data from last week, the news sparked a decent rally in U.S. Treasurys of all maturities, pushing the yield on the ten-year note back below 1.54%, as investors increasingly doubt the likelihood of a rate hike later this month with the current economic data backdrop. Also feeling the effects of the recent soft statistics, the U.S. dollar fell roughly one percent in value against major currencies. While the British pound saw a seven-week high of $1.3443 per pound, among the largest gainers on the day were the South African Rand and Australian Dollar, each up over 1.25%. South Africa’s mining and factory outputs mitigated chances for another recession there, while the strengthening of the Aussie dollar resulted principally from the Reserve Bank of Australia’s overnight decision to keep interest rates unchanged at 1.5%. Oil prices have seesawed the past two days following an update on Monday that Russia and Saudi Arabia, the world’s top two producers, had come to an agreement to stabilize prices via production curbs. While Iran continued its unlimited output policy, other countries such as Venezuela, Kuwait, and Qatar voiced their public approval of a neutral production target. The rumored deal initially prompted a near five percent jump in crude levels on Monday morning, but gains were pared later in the day after official details of the agreement lacked any concrete measures for future action. Saudi Energy Minister Khalid al-Falih also added to the bearish sentiment as he expressed his view that there is no need for a production freeze in the immediate term. All three major U.S. stock indexes weathered the weak services data and are trading marginally positive for the day, while Treasury yields/swap rates are down 5-9 bps with the larger moves in the belly of the curve. WTI crude oil is up slightly on the day at $44.61 per barrel, whereas Brent crude is down more than 1 percent to $47.12 per barrel.