Daily Market Color October 19, 2017Yields Fall with Geopolitical Tensions Catalan Independence Crisis Escalates Spanish Prime Minister Mariano Rajoy made history today as he invoked Article 155 of the 1978 Constitution for the first time ever in response to Catalan President Carles Puigdemont’s refusal to end his independence claim. Madrid had provided the Catalan administration with an ultimatum to revoke its bid for secession before 10 am today, however Puigdemont did not comply. Article 155, which was initially constructed to allow central government intervention in the case that a Spanish region “gravely threatens the general interest of Spain”, will effectively suspend Catalonia’s autonomy, although details of the measure’s implementation process remain opaque given that it has never been enacted before. Catalonia currently accounts for nearly 20% of Spain’s economic activity and tax base, and the escalation of the conflict continues to drive demand for haven assets in the region. The geopolitical concerns abroad led to a flight to safety as US markets opened today. Treasury yields/swap rates fell 1-5 bps across the curve, pushing the yield on the 10-year note below 2.32%. In equity markets, the DJIA and S&P 500 posted marginal gains while the tech-heavy Nasdaq slipped 0.3% lower, weighed down by a 2.5% decline in Apple shares after a report in China indicated connection issues with the Apple Watch. In commodities, crude oil prices slipped 1.25%-1.50% on the day, with a barrel of WTI crude trading near $51.40 while Brent crude drifted towards $57.30/barrel. Additionally, gold futures climbed 0.4% to $1,286/ounce. Initial Jobless Claims Fall to 44-Year Low The Labor Department’s weekly report on initial jobless claims displayed a larger-than-expected decline, as the impact from last month’s hurricanes on the coastal states continues to reverse course, albeit figures for Puerto Rico and the US Virgin Islands needed to be estimated with widespread power outages in those areas. The number of new claims for the week ended October 14th fell to a seasonally adjusted 222,000 (240,000 expected), down 22,000 from the previous week’s revised level. The four-week moving average of claims dropped by 9,500 to 248,250. Also detailed in the report, the number of continuing claims fell to its lowest level since December 1973 – 1.89 million for the week ended October 7th.