Daily Market Commentary

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Weekly Relative Value

Published at the top of each week by Balance Sheet Solutions, Weekly Relative Value tracks market and economic trends, analyzes key releases and watches ongoing political developments.  

Commentary prepared by Balance Sheet Solutions, LLC, a wholly owned CUSO of Alloya Corporate Federal Credit Union. Balance Sheet Solutions is a leading broker/dealer, investment advisor and ALM risk management consultant to credit unions.

Wednesday, July 26, 2017 at 8:00 a.m. CST
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Balance Sheet Solutions

Market Indications

Other Market Indicators

2s/5s Tsy Spread 0.49 -0.01
2s/10s Tsy Spread 0.93 -0.01
2s/30s Tsy Spread 1.52 0.00

DJIA-30 21613.43 +100.26
NASDAQ 6412.17 +1.37
S&P-500 2477.13 +7.22

Dollar Idx 94.09 +0.04
CRB Idx 177.66 +1.43


Today's Market Commentary

Recap – The uptick in the U.S. drove the S&P 500 to a new all-time high. Volatility continues to remain muted. The VIX closed to be unchanged at 9.43 and the ninth successive close below 10 – the longest ever streak. The commodity complex was helped as oil prices jumped by 3.3%. This increase first began on news that Saudi Arabia is planning deep crude export cuts next month, and then it climbed another 1.5% immediately after the U.S. close on news that the API was reporting crude inventories fell 10.2 million barrels last week. Over in government bond markets, yields rose across all maturities. U.S. Treasuries (two-year: +3 basis points; 10-year: +8 basis points) as the yield curve steepened. Turning to currency markets, the U.S. dollar index was up a touch (0.1%) yesterday.

Trump’s efforts to repeal Obamacare took a small step forward yesterday, securing enough votes (51 to 50) to allow senators to start debating on the healthcare legislation. The narrow win was sealed with the help of Vice President Mike Pence and the ailing Senator John McCain flying in to help. Trump has called the win a “giant step,” but this morning, the senate has rejected Senator Mitch McConnell’s replacement plan by a vote of 43-57. More attempts will be made today to find a proposal that will pass.

In other news, President Trump said he may reappoint Janet Yellen for a second term (expires in February) and noted that “I like her” and “I like to see rates stay low… she’s historically been a low rate person…” Gary Cohn was also touted as a potential contender. President Trump also said in the interview that his next priority is overhauling the tax code.

The focus will turn to the U.S. with the July Federal Open Market Committee (FOMC) rate decision. Although, given its late July and the Fed will likely announce an end to balance sheet reinvestment in September (starting from October), this could be a relatively dull meeting. That said, the Fed is unlikely to take any action in a policy firming direction at the meeting this week, partly because inflation has continued to surprise to the downside as of late.

Away from data (June New Home Sales expected +0.4%), Minneapolis Fed President Neel Kashkari will be the first speaker following the FOMC decision. On the earnings front, Coca-Cola, Ford, Boeing and Facebook are due to report today.

Economic Calendar

July 24 - 28, 2017: The Week Ahead

Future Fed Expectations
Sources: Bloomberg


Select Probabilities based on the Futures

Probability of Fed Funds rate increase on July 26, 2017 0%
Probability of Fed Funds rate increase on September 20, 2017 10%

**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.

The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Balance Sheet Solutions to discuss your specific situation and objectives.