Monday | September 2, 2014
- The treasury curve continued to flatten - short-term rates remain elevated since market participants expect a Fed rate hike in 2015, while core Eurozone sovereign yields capped US longer-term yields. The 10-yr Treasury dropped to the lowest level in a year, whereas short-term rates are close to year-to-date highs.
- Economic data last week was mostly positive; though the releases were not a key driver of rate movements. The Q2 GDP revision indicated the economy expanded at a 4.2% annualized rate, up from a 4.0% initial estimate and following a first-quarter contraction. The expansion was propelled by the biggest gain in business investment in more than two years. Durable Good Orders surged to 22.6%, above expectation of 8.0%,and the Consumer Confidence Index for August printed 92.4 versus the 80.0 expectation.
- Market participants will focus on the release of Non-Farm Payrolls on Friday. Analysts expect 225,000 jobs to be added to the economy for August, slightly above the 209,000 added in July. The Unemployment Rate is expected to decline to 6.1% from 6.2%. If the print is in line with expectations, it will represent the seventh print above 200,000; however, the labor force participation rate remains at the lowest level since 1978.
- Multiple Fed Speakers will be on the speaking circuit this week including Powell, Mester, Fisher, Kocherlakota and Rosengren. Market participants will continue to monitor Fed speak to have a better sense for the timing and scale of future rate hikes.
- The US may continue to experience a flight to quality until tensions between Russia and Ukraine are resolved. The summit between the Russian and Ukrainian President last week did not provide any positive notes. The Ukrainian President pledged to step up the country's defenses after speculation that Russia sent troops to fight in Ukraine alongside separatists.
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.