Daily Market Color May 17, 2017Treasurys Rally, Stocks Tumble as Trump Drama Prompts Flight to Safety Global financial markets gapped lower across the board with a substantial risk off move, as investors reacted to the news that President Donald Trump may be in violation of obstructing justice during his first month in office. Yesterday evening a report from the New York Times detailed a memo from recently sacked FBI Director James Comey dating back to February which documented a request from Trump to end the probe into his former national security advisor, Michael Flynn. “I hope you can let this go,” was the citation in question made to Comey, stating later in the memo that Flynn was a “good guy.” There reportedly exists other memos with similarly concerning exchanges between Comey and Trump during his initial days as President, none of which has been confirmed by the White House. While Democratic representatives are calling for immediate action and potential impeachment, it remains to be seen whether Trump’s writings/actions constituted impeachable behavior. Regardless, the latest political headlines have further exacerbated the ongoing drama in Washington and added further challenges to trying to push through any new legislative agenda targeted by the Trump administration. Today’s rally in Treasurys has driven yields/swap rates 5-12 bps lower across the curve, with the yield on the 10-year note down 10 bps to its lowest level in nearly a month at 2.21%. US stocks tumbled amid the risk-off slide, with the DJIA and S&P 500 down roughly 1.8% for the session while the Nasdaq losses top 2.5%. The US dollar is 0.5% lower on the day, on pace to post its sixth consecutive down day as all post-election currency gains have evaporated. Also shifting as a result of the political uncertainty, the probability of a June FOMC rate hike fell below 65% after being higher than 85% one week ago, as per the CME FedWatch Tool. Crude oil prices move higher today with the reporting of US inventory levels. Last week crude stockpiles fell 1.75 million barrels to a total of 520.8 million, marking the sixth straight week of supply drawdowns. Even more noteworthy, crude production in the US declined for the first time in the past 13 weeks, which when combined with Monday’s comments from Saudi and Russian energy ministers in favor of extended production cuts, provides positive price momentum heading into next week’s OPEC in Vienna. WTI crude settled near $49/barrel on the day while Brent crude topped $52/barrel.