Daily Market Analysis – Treasury Yield Curve Steepens

Equities:
It was a U.S Holiday yesterday and volumes were lighter across the board. Additionally, with few economic data releases the market retained its bullish stance. Japan’s Nikkei 225 rose by triple digits again as it closed up 187pts to 9,301. European markets remained positive on the day with the FTSE 100 adding 11pts to finish at 5,439 and the Stoxx Europe 50 squeezed out a 3pt win to close at 2,541. The Dow Jones Industrial Average will open Tuesday’s session at 10,447. Equity futures are still pointing up which will help support a move higher on the open.

Commodities & Treasuries:
Commodity markets were quieter than usual, though Copper remains strongly bullish as it padded it price by nearly $2 to $351.80. Gold rose modestly with little economic news and a stable dollar on Monday. Gold remains at 1,251. Oil was virtually unchanged as it sits at $74.05 a barrel. The Treasury curve continues to steepen as the far end of the curve sees yields continuing to rise, though they are still at historically low levels. The U.S Treasury 10-yr fell by 23/32nds pushing yields up to 2.713%. The 30-yr, long bond fell by 1 and 16/32nds as yield now approaches the 3.875% stated coupon.

Treasury Yield Curve

Treasury Yield Curve

Currencies:
Forex markets were quiet in the wake of the U.S Holiday and no real economic data releases. The EUR barely budged as it remains just south of 1.29. The GBP fell but found support at 1.54. The AUD remains above the critical .9100 level as it closed at .9172. The CAD closed at 1.0353  after Friday’s big rally. The CHF still has its sights set on Dollar parity as it closed at 1.0125. The JPY remains one of the key currencies to watch as it has been consolidating for a period of time near 84. Yen traders remained poised to catch the breakout

Economic Outlook:
Markets were still celebrating the euphoria over Friday’s better than expected employment data. However, the dark lining remains the elevated rate of Real Unemployment and the fact that the Private Sector created less jobs than the month before. Markets will now turn their attention to two Central Bank key interest rate announcements. The first one out of Japan and the other from the RBA. Both CB’s are widely expected to keep rates locked in at 0.10% and 4.50% respectively. German Factory Orders and Swiss Unemployment will also print later today. In New Zealand, Manufacturing Activity data will be released. Expect some volatility back in the market as traders start to look towards year end and position realignment.

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