Treasuries prices are lower this morning as market participants react to a better than expected Initial Jobless Claims report and a strong opening in the stock. The 2-year note has dropped 1/32 to yield 0.50% while the 5-year note has lost 7/32 to yield 1.51%. Meanwhile the 10-year Treasury note is currently trading 8/32 lower to yield 2.91% and the long bond has declined 4/32 so far, yielding 4.29%. For the record, the Department of Labor released its weekly Initial Jobless Claims report showing that last week’s claims rose by 2,000 from the revised 437,000 recorded for the previous period but lower than the expected 441,000. Continuing claims dropped 48,000 in line with expectations to reach 4.295 million. Supporting the trend seen in the weekly report, the less volatile 4-week moving average of initial claims reported a decrease of 4,000 from the reported 447,000 for the previous week.
Employment, and as a result, the Initial Jobless Claims release continues to be one of the key factors, along with inflation, in investors’ minds as this economic recovery is yet to show concrete signs of an improving labor market. Lower than expected inflation numbers, as seen in yesterday’s CPI Index release, will continue to give “wiggle room” to the Federal Reserve as it keeps trying to boost the economy via QE2 and a 0.00 – 0.25% Fed Funds. In fact, Fed Fund Futures currently give an 67% probability that nothing will change in one year with only a 33.00% probability of a rate increase by the November 2nd 2011 FOMC meeting.
In other economic releases for the day, the Leading Economic Indicators, a composite index of ten economic indicators designed to predict economic activity six to nine months in the future, was released at 9:00am CST. The index rose 0.50% in October, in line with analysts’ expectations. Additionally, the Philadelphia Fed also released its report for November showing the highest increase in 2010 at 22.50 versus the forecast 5.00. Finally, there is a plethora of speeches by Federal Reserve officials. Federal Reserve Governor Kevin Warsh and Federal Reserve Bank of Minneapolis President Narayana will speak in Chicago, IL at two different events. Mr. Warsh’s speech is on “The Future of Financial Markets” while Mr. Kocherlakota will speak on “Monetary Policy Actions and Fiscal Policy Substitutes”. Federal Reserve Bank of Cleveland President Sandra Pianalto speaks on “Current Economic and Monetary Policy Issues” and Federal Reserve Bank of Philadelphia President Charles Plosser is in Washington, D.C. speaking on “Asset Bubbles and Monetary Policy”.
Employment, and as a result, the Initial Jobless Claims release continues to be one of the key factors, along with inflation, in investors’ minds as this economic recovery is yet to show concrete signs of an improving labor market. Lower than expected inflation numbers, as seen in yesterday’s CPI Index release, will continue to give “wiggle room” to the Federal Reserve as it keeps trying to boost the economy via QE2 and a 0.00 – 0.25% Fed Funds. In fact, Fed Fund Futures currently give an 67% probability that nothing will change in one year with only a 33.00% probability of a rate increase by the November 2nd 2011 FOMC meeting.
In other economic releases for the day, the Leading Economic Indicators, a composite index of ten economic indicators designed to predict economic activity six to nine months in the future, was released at 9:00am CST. The index rose 0.50% in October, in line with analysts’ expectations. Additionally, the Philadelphia Fed also released its report for November showing the highest increase in 2010 at 22.50 versus the forecast 5.00. Finally, there is a plethora of speeches by Federal Reserve officials. Federal Reserve Governor Kevin Warsh and Federal Reserve Bank of Minneapolis President Narayana will speak in Chicago, IL at two different events. Mr. Warsh’s speech is on “The Future of Financial Markets” while Mr. Kocherlakota will speak on “Monetary Policy Actions and Fiscal Policy Substitutes”. Federal Reserve Bank of Cleveland President Sandra Pianalto speaks on “Current Economic and Monetary Policy Issues” and Federal Reserve Bank of Philadelphia President Charles Plosser is in Washington, D.C. speaking on “Asset Bubbles and Monetary Policy”.
Source: Bloomberg L.P. Chart by The Fixed Income Strategies Group RBC Wealth Management
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