Monday | August 18, 2014
- Geo-political tensions have continued to weigh on the market. News of US airstrikes in Iraq and the continued militarization of the Russia/Ukraine border have increased the possibility of further economic sanctions weighing down international trade.
- Spreads between 10-yr German Bunds and USTs, currently 138 bps, have continued to widen. In 2005-6, the last time Treasury yields were over 100bps above Bunds, the spread peaked around 120 bps. At these levels, moves lower in German and Eurozone rates will continue to put pressure on treasuries on a relative-value basis.
- Last week, the Treasury auctioned $67bln of new 3-, 10-, and 30-yr USTs. While the 3- and 10-yr note auctions were non-events, falling in line with prior auctions, the 30-yr bond auction was met with stellar demand. The issue settled 2.3 bps inside the When Issued market and sparked a broader rally in the long-end.
- The headline event of the coming week will be the Kansas City Fed's annual monetary policy conference in Jackson Hole. Key speakers include Fed Chair Janet Yellen and ECB President Mario Draghi.
- CPI data will be released on Tuesday (est +0.2% MoM ex. Food and Energy), which will be closely watched by market participants seeking to pinpoint the timing of the Fed's first rate hike and the ending of its quantitative easing program. We will also see a slew of significant housing data including Housing Starts which are expected to climb 73k to 966k, rebounding from a disappointing July print.
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.