Daily Market Color December 28, 2016Treasurys Rally Following Strong Auction as Weak Housing Data Leads Stocks Lower Pending Home Sales Unexpectedly Decline As released by the National Association of Realtors today, the number of US homes under contract decreased 2.5% in November, a significantly weaker level than the 0.5% median forecast. Falling to the lowest reading in almost a year, pending home sales were substantially impacted by the post-election rise in mortgage rates, which created an additional hurdle for potential homebuyers who already face low inventories and rising house prices. Detailed in the report, three of the nation’s four regions experienced a drop in contract signings, with the largest decrease seen in the Midwest (-2.5%), while the Northeast was the only region to report increase (+0.6%). Yields Decline Following 5-Year Note Auction For the first half of today’s session, both bond and equity markets displayed range-bound trading on thin volumes, before a strong auction of 5-year notes prompted a rally in US Treasurys. In the final 5-year auction of the year, demand from indirect bidders reached a record-high 71.4% of the $34 billion issue. This was in stark contrast to yesterday’s 2-year Treasury auction, which saw very limited demand. Treasury yields/swap rates traded 2-5 bps lower after today’s auction across the curve, with the final Treasury auction of the year (7y, $28 billion) set for tomorrow. The yield on the 10-year Treasury note is down 4.5 bps on the day, residing near 2.51% All three major stock indices finished 0.3% to 0.9% lower on the day, with real estate shares leading the decline. The US dollar rose to its highest mark in more than ten years as the dollar index rose 0.4% to 103.43. Crude oil prices traded marginally higher throughout the trading session as investors await the implementation schedule for the recently agreed production cuts. WTI crude is currently trading at $53.90/barrel while Brent is near $56.20/barrel. Gas prices have been on a tear lately as well, with NYMEX Natural Gas +2.5% on the day, +17% over the last week, and +68% year-to-date.