(Source: Trading Economics)
Bloomberg) — Equities reversed overnight gains after White House economic adviser Larry Kudlow said he’s “not as optimistic” as he once was for a China trade deal, pouring cold water on a report Trump asked officials to draft terms for a deal with China’s Xi Jinping.
Then stocks pared losses when Trump said he thinks a deal with China will be reached. The S&P 500 dropped for the first time in four days, while the Nasdaq 100 slid 2 percent as Apple retreated, underwhelming sales forecasts.
The 10-year Treasury yield hit 3.20 percent and the dollar rose after a better than estimate U.S. jobs report with annual wages rising over 3%.
The data suggests the Federal Reserve won’t be deterred from its current rate-hike path.
Elsewhere, copper soared, gold fell while crude pared early session losses.
- The U.S. has agreed to let eight countries keep buying Iranian oil after it reimposes sanctions on Nov. 5
- Kudlow says no massive movement between U.S. and China on trade
- ECB is considering fresh round of TLTROs: MNI
- ECB’s Praet: “Ill-designed policies,can eventually lead a country into crisis,”
- U.S. workers sidelined by weather at 198k
As of Close on November 1st, 2018
(Bloomberg) — FNCL CC spread to 5/10-year blend (+94) closed mostly steady; UST 10Y yield closed 1bp lower at 3.13%.
- All levels/prices/yields as of close, according to Bloomberg data
- Primary/Secondary spread ~1bp wider at +77bp; trailing 3-mo. high/low close: +89bp (Oct. 2)/+73bp (Oct. 22)
- 10Y yield ~1bp lower at 3.13%; trailing 3-mo. high/low close: 3.23% (Oct. 5)/2.81% (Aug. 24)
- FN30 CC yield ~1bp lower at 3.98%; trailing 3- mo. high/low close: 4.02% (Oct. 22)/3.56% (Aug. 20)
- FNCL 3s +65bp to 5/10-yr blend, ~unchanged, 90-DMA +62bp
- FNCL 4s +93bp to 5/10- yr blend, ~unchanged, 90-DMA +91bp
- FNCI3/FNCL3.5 down 1+/32
- Volatility (1M10Y) ~3.0bp lower at 60.8bp; trailing 3-mo. high/low close: 65.1bp (Oct. 30)/49.4bp (Oct. 1)
- 10Y swap spread ~0.2bp wider at 6.7bp; trailing 3-mo. high/low close: 7.8bp (Aug. 24)/3.8bp (Oct. 5)
- 2/10 slope ~1bp wider at +28bp; trailing 3-mo. high/low close: +34bp (Oct. 5)/+19bp (Aug. 24)
(Bloomberg) — Treasuries were well-offered throughout the U.S. session, extending overnight losses following a solid jobs report and positive turn in China trade deal talks; ahead of the U.S. cash settlement, Trump told reporters he thinks the U.S. will reach a trade deal with China.
- Yields ended near highs of the day, cheaper by 6bp to 8bp across the curve; front end slightly outperformed, steepening 2s10s and 2s5s by just over 1.5bp; late boost to S&P e-minis from Trump’s comments weighed into the close
- Most losses were seen over U.S. morning after U.S. nonfarm payrolls for October rose 250k vs 200k consensus; unrounded avg hourly earnings were 3.14% y/y, top end of rounded 3.1% print
- 10k TY futures block trade mid- morning added to downside as yields continued to push higher; by U.S. afternoon session, 30-year touched 3.45% and a new high for 2018
- UST 10-year reached as high as 3.212%, cheapest since Oct. 18
- Rate lock sale flows and auction setups for next week may have added to early downside move across Treasuries; they were pushed forward to begin on Monday
- After jobs data, demand re-emerged for short-term Treasuries downside hedges, which cover looming risk events including U.S. midterm elections and FOMC decision
- In eurodollars, pin risk emerges at 97.00 level in Mar19 futures after open interest in the put option reached 1m contracts
(Bloomberg) — The high-grade primary market, which had been largely immune from broader market volatility for much of October, showed distinct signs of weakness for the first time this week.
- Credit markets suffered broadly as spreads widened and IG bond funds reported significant outflows, according to Lipper. Monthly returns for the IG market were the worst for any October since 2008
- Issuers paid elevated concessions as weak demand led to minimally oversubscribed books and less-than-average tightening through the pricing process
Week YTD NIC 9.3 4.4 Books Covered 2.2x 2.9x IPT -> Launch (Delta) 11.1 15.4
- Primary market volume rebounded, albeit with difficulty, after falling nearly $10b short of expectations last week
- Volume of $17.55b was in line with estimates of $15-$20b and a significant pick-up from last week’s $6b, suggesting that borrowers were eager to get back to business after the equity market rout
- Issuers exercised caution in the beginning of the week as they looked to secure investors who may have been nervous about the prior week’s weak macro tone
- Seven of the 11 deals priced on Monday and Tuesday were announced as ‘will not grow,’ a sign that issuers wanted to provide transparency to investors
- Higher- quality names accounted for much of the week’s supply
- All deals priced on Monday had single-A ratings, among the higher possible ratings in investment-grade
- Lower-rated issuers faced weak demand and double-digit concessions on Tuesday, spurring relatively defensive names to move forward on Wednesday. Several of Thursday’s issuers had single-A ratings
- Just two of the issuers that moved forward this week were in the lowest rung of investment-grade
- Weekly volume $17.550b vs $5.975b last week
- MTD volume $7.350b
- October volume $85.875b
- September volume $122.900b
- YTD volume $989.109b
THIS WEEK’S IG ANALYSES
- Issuers Ride Rally Before Volatility Strikes Again
- Issuers Pay Up to Sell Bonds Amid Buyer Pushback
- Daimler, Canadian National Unfrightened by Market
- Debt Borrowers Continue to Pay Up to Price Deals
Emerging markets currencies pared gains, the Turkish lira outpacing peers after reports the U.S. Treasury Department lifted sanctions on two Turkish officials.
(Bloomberg) — Sugar closes higher for the first time in a week as exports from top producer Brazil decline and speculation heightens that the nation’s currency will continue to strengthen after the election of right-wing candidate Jair Bolsonaro.
Brazilian shipments tumbled in October from a year earlier to the lowest for that period since 2005, government data showed. Mills shifted to making more-profitable ethanol as the local currency rallied, reducing the appeal of exports priced in the dollar.
Brazil’s exports fell 33% to 1.93m tons last month The real strengthened 8.1% in October Commodities gain on Friday on speculation that U.S.-China trade friction will ease; after softs closed, President Donald Trump says he thinks the U.S. and China will reach a deal to end their trade dispute.
Raw-sugar for March delivery rises 1.9% to close at 13.44c/lb on ICE Futures U.S. in N.Y, the first gain since Oct. 24 This week, the price falls 2.9%.
“Over the last decade. the market has become accustomed to ’easy’ access to an ‘ever-expanding’ Brazil,” Thomas Kujawa , co-head of the softs department at Sucden Financial, says in report This year, the smaller supply “may well pose some difficulty for certain corners of the market” Speculation emerges that Bolsonaro will privatize some state assets, and some analysts are forecasting strength in the real, Sucden said.
Other soft commodities
Arabica-coffee futures for December delivery rise 1.9% to $1.2005/lb In October, the price jumped 10%, the most since July 2018.
Cocoa futures for March delivery climb 0.6% to $$2,301/ton The price gains for the fourth straight day, the longest rally since Aug. 24
(Bloomberg) — What to watch for 11/5-11/9 (all times ET unless noted).
- Oct. Final Markit U.S. Services, Composite PMI 9:45am
- Oct. ISM Non-manufacturing Index 10am
- Earnings pre-market: BRG, CNA, DEA, INVH, KMPR, L, OHI, PGRE, SHO, SRC, TIER, XHR
- Earnings post- market: AEL, APLE, APTS, ARGO, BHF, CRD/A, CTRE, CXW, DRH, EARN, GAIN, GLRE, GMRE, GPMT, GSHD, HHC, KREF, LTC, MAR, NYMT, OUT, RILY, RLH, SBAC, SBRA, SLRC, SUNS, TRTX
- Bank of America Merrill Lynch Future of Financials Conference, New York (day 1 of 2): AB, ARES, ASB, BAC, GS, HBAN, HOPE, IVZ, NDAQ, NYCB, SBNY, USB
- Extraordinary meeting: CME
- Sept. JOLTS Job Openings 10am
- Earnings pre-market: BLD, GFN, HLNE, HPT, JLL, LGIH, LXP, MFA, NHI, NRE, OCN, ONDK, RHP, SNH, SOHO, TIPT, VER, WHF
- Earnings post-market: AIZ, AJX, ATAX, BEL, CCS, CGBD, CHCT, CSWC, EVRI, HCI, JKHY, LAND, LC, MBI, MRCC, PRA, PRI, PSEC, RLJ, TPRE, TSLX, TWO, VCTR, WHLR, ZG
- Earnings, no specific time: FNHC
- Bank of America Merrill Lynch Future of Financials Conference, New York (day 2 of 2): AXP, BANC, BOH, BX, C, CBOE, ETFC, EV, EVR, FHB, FRC, GHL, JHG, JPM, KKR, MS, OAK, SNV, WFC, ZION
- Sandler O’Neill East Coast Financial Services Conference, Palm Beach: COWN, INDB, WSFS
- Weekly MBA Mortgage Applications 7am
- Sept. Consumer Credit 3pm
- Earnings pre-market: BAP, CLNY, EMCI, EVOP, GEO, GNL, ITG, PTVCB, UFCS
- Earnings post-market: AMBC, CCT, CHMI, ECPG, EFC, FG, GDOT, IVR, JBGS, JRVR, MITT, MMI, NEWT, NMFC, OTCM, PRU, RC, RWT, SQ, TCRD, WMC, WYNN
- Sandler O’Neill East Coast Financial Services Conference, Palm Beach (day 2 of 2): INBK, MVBF
- Piper Jaffray Western Bank Symposium: SBT
- National Association of Real Estate Investment Trusts REIT World Convention, San Francisco (day 1 of 2): AHH, BXP, CONE, COR, EQIX, ESS, HTA, IRM, LPT, LTC, MNR, MPW, NSA, OFC, OHI, PEI, STOR, UNIT, VTR
- Weekly Initial Jobless Claims, Continuing Claims 8:30am
- Weekly Bloomberg Consumer Comfort 9:45am
- FOMC Rate Decision 2pm
- Earnings pre-market: AGM, CHH, COOP, DHI, DS, FLY, FOR, IEP, LAMR, TCPC, WP
- Earnings post-market: AL, IMXI, NNI, ORM, PRAA, RDFN, RM, TRUP, UEPS
- Earnings, unspecified time: AGO
- Piper Jaffray Western Bank Symposium (day 2 of 2): BANC, HAFC, HOPE
- BancAnalysts Association of Boston Conference: EWBC, FITB, FRC, JPM, PNC, STI, STT, WBS
- National Association of Real Estate Investment Trusts REIT World Convention, San Francisco (day 2 of 2): ARE, BRX, HTA, O, WELL
- Oct. PPI Final Demand 8:30am
- Nov. Prelim. U. Of Mich. Sentiment 10am
- Sept. Final Wholesale Inventories 10am
- Fed’s Quarles to speak on stress testing 9am
- Earnings pre-market: ESNT, MGI, STRS, STWD
- BancAnalysts Association of Boston Conference, Boston (day 2 of 2): MTB, USB, WFC
-R.W.N II, yours in 322.
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