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.

Tuesday, March 28, 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 0.65 -0.02
2s/10s Tsy Spread 1.10 -0.02
2s/30s Tsy Spread 1.71 -0.02
DJIA-30 20596.72 -59.86
NASDAQ 5828.69 +11.04
S&P-500 2343.98 -1.98
Dollar Idx 99.16 -0.00
CRB Idx 183.73 +0.64

Today's Market Commentary

After a bad start to the U.S. session the S&P 500 only fell -0.10% yesterday (after being as low as -0.94% intra-day). The leader of the big selloff at the U.S. open yesterday were banks, which tumbled over -2.50% within the first 10 minutes or so of trading. In doing so, that meant U.S. banks briefly entered correction territory after plummeting -10.70% from the early month highs. The sector bounced back impressively into the close and finished a shade in the red by the end of play at -0.37%.

That move also came in the face of another day of tumbling Treasury yields with the 10-year finishing the day three basis points lower at 2.37%. That is the lowest closing yield now since February 27. It’s worth noting that Chicago Fed President Charles Evans said yesterday that he sees the possibility of the Fed only hiking one more time this year should uncertainty continue to linger around the outlook for inflation and government spending.

The excitement for volatility also peaked early in the day yesterday after the VIX touched an intraday high of 15.11 and the highest since November, before then settling back to finish at 12.50 and down over 3% on the day. Meanwhile, gold (+0.91%) found a bid amongst the risk-off moves and in doing so has now rebounded nearly 5% from the early month lows. While in FX, the greenback retreated -0.46% and is back to pretty much where it was in October last year.

Moving on. In the U.S. yesterday, the sole release was the Dallas Fed’s manufacturing survey, which was reported as falling 7.6 points in March to 16.9 (vs. 22.0 expected).

Is the Trump reflation trade dead? 1) Fed funds market pricing are well below the Federal Open Market Committee dots; 2) the dollar index is now back to where it was at the end of October; and 3) the S&P 500 has been performing similarly to how it normally does after a close election even if there was a small pop up in February. Is the Trump rally over and done with?

Looking at the day ahead, in the U.S. the early data is the advance goods trade balance reading for February and the preliminary wholesale inventories data for February. Following that we’ll get the S&P/Case- Shiller house price index print in January, the March consumer confidence print and Richmond Fed manufacturing survey. Away from the data it is a busy day for Fedspeak. The Fed’s Esther George speaks before Fed Chair Janet Yellen speaks. Also, due up today is Robert Kaplan and Jerome Powel.


Economic Calendar

March 27 - 31, 2017: The Week Ahead

Future Fed Expectations
Sources: Bloomberg


Select Probabilities based on the Futures

Probability of Fed Funds rate increase on May 3, 2017 13%
Probability of Fed Funds rate increase on June 14, 2017 50%

**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.