Monday | October 6, 2014
- Long-term treasury yields decreased and the curve flattened throughout the week amid a disappointing ISM Manufacturing release and geopolitical concerns. On Friday, treasury yields experienced increased volatility on the back of the jobs report. On the week, yields on the 2, 10, and 30-yr Treasuries decreased by 3, 10, and 9 bps, respectively.
- Ongoing geopolitical concerns aided the flight-to-quality bid mid-week. As protests in Hong Kong continued, Chief Executive Leung refused to meet with pro-democracy demonstrators who want a reversal of a decision by the Chinese government to screen all candidates for the 2017 direct election. Also, Russia announced that it is not considering capital controls as a method of stemming outflows of capital from the country. Russia has not experienced a net inflow of capital since 2007, the year after it lifted restrictions.
- Nonfarm Payrolls beat expectations with 248K jobs added for the month of September versus expectations of 215K. Further, August's disappointing 142K figure was revised up to 180K. The Unemployment Rate also exceeded expectations decreasing 0.2% to 5.9%, the lowest level since August 2008. Immediately following the jobs report, short-to-medium-term swap rates initially increased approximately 5-6 basis points while longer-term rates were up about 3-4 basis points. The benchmark 10-year Treasury closed Friday relatively unchanged at 2.43%.
- Market Participants will focus on the September 16-17th FOMC meeting minutes to gain insight into the update to the Fed's forecast for the Fed Funds rate.
- Jon Hilsenrath from the WSJ provided analysis of the jobs report and highlighted the strong payroll growth, in combination with the new unemployment rate, could warrant rate tightening earlier than expected.
- European Central Bank President Mario Draghi will speak in Washington at the Brookings institution regarding the latest developments in Europe and in global central banking. Draghi's remarks will be followed by a discussion with Fed Vice Chairman Stanley Fisher.
The information represented herein was obtained from various sources, which we believe to be reliable. Neither the information presented nor opinions expressed constitutes an offer to buy or sell any security. And it is not intended to guide the investor on which securities to buy, or when to buy or sell.