Daily Market Color

Yields Continue to Rise Ahead of Fed Decision

Jeff Davenport


Trump Reinforces “America First”

This morning President Trump utilized his annual speech to the United Nations General Assembly to reiterate his “America First” plan of action to the other global leaders in attendance.  Highlights of his comments included:

  • Trump administration has “accomplished more than almost any administration in the history of our country”

    • The statement was met with laughter from the audience

  • “I have great respect and affection for my friend, President Xi, but I have made clear our trade imbalance is just not acceptable”

    • Reflection of the current trade status with China

  • “Iran’s leaders plunder the nation’s resources to enrich themselves and spread mayhem in the Middle East and far beyond”

    • Supporting the exit of the 2015 Iran nuclear accord

  • “We will not allow our workers to be victimized, our companies to be cheated and our wealth to be plundered and transferred”



In the background, US and Canadian trade officials have made little progress in advancing negotiations to rework a trilateral version of NAFTA, where the end of this week has been set as the unofficial deadline.  “There is still a fair amount of distance between us,” explained U.S. Trade Representative Robert Lighthizer earlier today, “Canada’s not making concessions in areas we think are essential”.  Those major areas of contention include the access to dairy markets, imposing of auto tariffs, and resolution process of any trade disputes.


Fed Decision Due Tomorrow – What to Look for

At 2pm tomorrow afternoon the Fed will officially announce its latest monetary policy decision (1/4 point hike near certain) and more importantly, provide guidance on its projected path of rate hikes over the next two years (and longer).  An updated “dot plot” from the Fed will serve as the most concrete depiction of their outlook for rates, where expectations are currently pointing towards quarterly hikes through June 2019.  There are also a number of items up for discussion within the FOMC to monitor, including the impact of the recently escalated trade uncertainty with China and Canada, continued flattening of the yield curve, and historic highs in equity markets.   



Stocks, Bonds Keep Course

Treasurys maintained a modest selloff throughout today’s trading session as yields/swap rates rose an additional 1-2bps across the curve.  The 10-year note yield touched as high as 3.11%, 1.5bps lower than its highest level since May, while the 2-year yield climbed above 2.84% (highest since 2008).  Major US stock indices were mixed on the day, with the DJIA (-0.26%) and S&P 500 finishing in the red (-0.13%) while the tech-heavy Nasdaq managed a 0.18% gain.  In commodity markets, the rally in crude oil was tempered by President Trump’s comments towards OPEC in which he demanded the lowering of oil prices and claimed that they were “ripping off the rest of the world”.


Jeff Davenport

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