Yields pushing higher
march 1, 2019
–Once again yields rose with tens up 3.1 bps to 2.722%, as Q4 GDP came out stronger than expected 2.6% (2.2 exp). Chicago Purchasing Mgr also solid at 64.7 vs 57.5 expected. Personal Income and Spending today expected +0.3 and -0.3, with Core yoy PCE prices 1.9%. Employment data is NEXT Friday.–Euro$ curve flattened somewhat, reds -3.375, grns -2.625, blues -1.625 and golds -1.5. However, 2/5 treasury spread closed positive for the first time since Jan 22 (I marked at 0.1 bp, 2.52 in 2’s and 2.521 in 5’s).
–This morning treasuries a bit weaker as stocks re-test recent highs. MSCI quadrupled China A-shares weight in global benchmarks, further supporting a stimulus infused rally in China. However, S Korea trade data was extremely weak, with exports -11.1% and imports -12.6%. From a CNBC piece: “China-bound sales are tumbling especially as memory chip prices are falling. Looking ahead, export growth should remain weak in March but shrinking of exports should bottom out March or April as demand from China recovers on stimulus measures,”
–Are yields going up due to robust growth, or are auction supply concerns growing? An end to QT may alleviate some of the supply concerns, but with short rates on hold and better growth possible, the curve is still at risk of steepening.
