Treasury prices rose Wednesday as another grim day for economic data pointed to worsening consumer confidence and labor conditions. A worse than expected Consumer Confidence (-54 vs. -53), coupled with a weaker than expected ADP Employment report (-250 vs. -205) set the stage for a volatile day in both the equity and bond markets. The Dow Jones traded in a wide (390 points) range to finally gain 172 points for the day and close at 8,591. The 5-year Treasury rose 5/32s to yield 1.60%, the benchmark 10-year Treasury increased 4/32s to yield 2.66%; finally, the long bond gained 09/32s to close at a record low yield of 3.16%. For the record, the Fed Beige Book, a summary of economic conditions in the 12 Fed districts (over the past 6 weeks), was released a 1:00 pm CST. Although the report gives anecdotal information, market participants look at how the districts have performed lately. The report showed that the economy weakened in all 12 of the Federal Reserve districts and that credit standards rose across the nation as loan delinquencies and defaults were on the rise. “Overall economic activity weakened across all Federal Reserve Districts since the last report. Lending contracted, with many Districts reporting reductions in residential, commercial and industrial lending and tightening lending standards.”
The Treasury market continues yesterday’s positive tone this morning as investors react to the Initial Jobless Claims report and the latest move from the ECB. The 10-year Treasury is up 10/32s yielding 2.62% while the 30-year Treasury has gained 27/32s this morning to yield 3.12%. Although unemployment worries continue to take center stage (with a better than expected Initial Jobless Claims report), Investors are also keeping a close eye to the unprecedented rate cut from the ECB (-75 basis points to 2.50%) as a sign that the Central Banks are willing to take quick action in order to contain the global economic slowdown. The Bank of England also cut its benchmark rate by 100 basis points to 2.00%.
For the record, the Department of Labor released its weekly Initial Jobless Claims report in which claims dropped 21,000 from the previous week to 509,000 (Thanksgiving Holiday boost?). Continuing claims, however, increased 89,000 to 4.087 million, the highest level since the early ‘80s. The less volatile 4-week average number of initial claims was consistent with the upward trend in Continuing Claims by reporting an increase of 6,250 from the reported 518,250 for the previous week. This report can be indicative of what is to come tomorrow when the Employment report is announced at 7:30 CST, from historical perspective there is a direct correlation between this report and the unemployment rate. An unemployment report surging past 7.00% could have a very negative effect in equities and push Treasury prices even higher. In other economic news, Factory orders, a comprehensive report on Manufacturers' Shipments, Inventories, and Orders (including non durable items) is scheduled to be released at 9:00 am CST. Analysts are expecting that this number declined by 4.50% in October.
The Treasury market continues yesterday’s positive tone this morning as investors react to the Initial Jobless Claims report and the latest move from the ECB. The 10-year Treasury is up 10/32s yielding 2.62% while the 30-year Treasury has gained 27/32s this morning to yield 3.12%. Although unemployment worries continue to take center stage (with a better than expected Initial Jobless Claims report), Investors are also keeping a close eye to the unprecedented rate cut from the ECB (-75 basis points to 2.50%) as a sign that the Central Banks are willing to take quick action in order to contain the global economic slowdown. The Bank of England also cut its benchmark rate by 100 basis points to 2.00%.
For the record, the Department of Labor released its weekly Initial Jobless Claims report in which claims dropped 21,000 from the previous week to 509,000 (Thanksgiving Holiday boost?). Continuing claims, however, increased 89,000 to 4.087 million, the highest level since the early ‘80s. The less volatile 4-week average number of initial claims was consistent with the upward trend in Continuing Claims by reporting an increase of 6,250 from the reported 518,250 for the previous week. This report can be indicative of what is to come tomorrow when the Employment report is announced at 7:30 CST, from historical perspective there is a direct correlation between this report and the unemployment rate. An unemployment report surging past 7.00% could have a very negative effect in equities and push Treasury prices even higher. In other economic news, Factory orders, a comprehensive report on Manufacturers' Shipments, Inventories, and Orders (including non durable items) is scheduled to be released at 9:00 am CST. Analysts are expecting that this number declined by 4.50% in October.
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