The US session was void of any US data today. The only economic report was the Ivey PMI index out of Canada which came out stronger than expected. Despite the gains, the CAD weakened and was one of the weakest of the major currencies.
The USD today, was the strongest of the major currencies, and that came despite rates moving lower on the day.
Admittedly, the US rates did come off its low levels and the 2-year is near unchanged, but the benchmark 10 year yields are still down -3 basis points on the day.
Today, the US treasury did auction $58 billion of three year notes with a negative tail of -0.3 basis points and a solid bid-to-cover at 2.63X (vs 6-month average of 2.57X). Those results compare favorably to last month when the issue sold with a +2.0 basis point tail with a much lower bid-to-cover of 2.50X.
Tomorrow, the 2nd leg of the coupon auction this week will occur at 1 PM with the sale of 10-year notes. On Thursday, the treasry will complete the coupon auctions with the sale of 30-year bonds.
The weakest currency for the day was the JPY for the 2nd consecutive day.
Fed’s Kashkari did release his monthly “essay” and also conducted a Q&A event. Below is a summary of his comments.
Federal Reserve official Neel Kashkari commented on the resilience of the housing market to tight monetary policy, suggesting that this resilience might indicate a temporary increase in the neutral rate, which he has modestly adjusted to 2.5% from 2%. Despite progress on inflation in the latter half of 2023, this progress has since stalled, raising questions about the ongoing effectiveness and restrictiveness of current policy measures. The underlying economic demand remains robust, evidenced by recent GDP data affected primarily by changes in inventories and net exports, rather than a slowdown in consumer or business activities. Kashkari noted concerns with a recent soft jobs report and an uptick in new rent rates, which may signal underlying inflation pressures. Although not ruling out further rate hikes if necessary, Kashkari believes the most likely scenario is that the Fed will maintain current rates, with potential cuts contingent on sustained disinflation. He emphasized that the Federal Reserve’s decisions will remain data-driven and not influenced by external factors such as elections, committing firmly to the 2% inflation target and expressing a need for patience in monetary policy, suggesting that rates may be held steady longer than the public anticipates.
In the US stock market today, the major indices were mixed but little changed.
- Dow Industrial Average average rose 0.08%
- S&P index rose 0.13%
- NASDAQ index fell -0.10%
The small-cap Russell 2000 rose by 0.19%.
In the US debt market:
- two year yield 4.830%, +0.8 basis points
- 5-year yield 4.472%, -1.0 basis points
- 10 year yield 4.461%, -2.8 basis points
- 30-year yield 4.602%, -4.0 basis points
Despite increased geopolitical tensions out of Israel, crude oil is trading at $78.31, down -$0.17 on the day.
The price of bitcoin traded within a fairly narrow range of $62,818 and $64,389.
Gold fell -$11.87 or -0.51% at $2313.90.