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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.
Friday, March 24, 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
|2s/5s Tsy Spread||0.69||-0.01|
|2s/10s Tsy Spread||1.16||-0.01|
|2s/30s Tsy Spread||1.77||-0.01|
Today's Market Commentary
Recap – U.S. stocks ended an up-and-down session slightly lower, while Treasuries slipped with the dollar as House Republicans postponed voting on a healthcare bill, raising speculation the Trump administration’s pro-growth policies will face hurdles in Congress. The S&P 500 Index fell to the lowest level of the session after Republican House leadership said there would be no vote Thursday, before paring some of the drop into the close. The dollar measure swung between gains and losses throughout the session, while the yield on 10-year Treasury notes edged higher to 2.41%. Gold fell 0.3% to $1,249.20, halting a six-day advance. West Texas Intermediate Crude slipped 0.8% to $47.69 a barrel on speculation record U.S. crude stockpiles (that have undermined OPEC’s output cuts) may finally be set to shrink.
Trump Gives a Healthcare Ultimatum – The Trump administration doubled down on its demand that House Republican leaders hold a vote Friday on their embattled health-care bill without any changes and with lingering uncertainty about whether they have enough support to pass the measure. “After seven horrible years of Obama Care (skyrocketing premiums and deductibles, bad healthcare), this is finally your chance for a great plan!” President Donald Trump tweeted Friday morning. Referring to the conservative House group that has several members holding out on the plan, Trump added, “The irony is that the Freedom Caucus, which is very pro-life and against Planned Parenthood, allows P.P. to continue if they stop this plan!” Planned Parenthood, which offers reproductive health services such as birth control and abortions at U.S. clinics, has long been a Republican target for defunding. President Donald Trump told House Republicans either pass the American Health Care Act, or Obamacare stays. House GOP leadership is expected to bring the bill to a vote today, but it is still unclear whether it has the votes to pass.
European PMIs Beat Again – Markit eurozone Purchasing Managers’ Index (PMI) hit 56.7 in March, its best reading in almost six years, according to IHS Markit data released Friday.
Russia Cuts Rates – The Central Bank of Russia unexpectedly lowered its key interest rate by 25 basis points to 9.75% as "inflation declines [were] ahead of forecast."
Looking at the day ahead, U.S. economic data picks up a bit. The Commerce Department reported Orders for U.S. durable goods increased more than forecast in February, a sign companies are confident about the outlook for the economy. Bookings for goods meant to last at least three years rose 1.7% after a 2.3% advance the prior month that was larger than previously estimated. The median forecast called for a 1.4% increase. Excluding transportation, equipment demand (which is often volatile) orders increased 0.4% after a 0.2% gain. Markit U.S. manufacturing and services PMIs cross the wires at 9:45 am ET. The Baker Hughes rig count is due out at 1:00 p.m. ET. Earnings reports trickle out. Finish Line reports ahead of the opening bell.
Market Update – Stock markets around the world are mixed. Japan's Nikkei (+0.9%) was out front in Asia, and France's CAC (-0.5%) lags in Europe. The S&P 500 is set to open little changed near 2,345. The Benchmark 10-year Treasury is currently trading flat at 2.41%.
March 20 - 24, 2017: The Week Ahead
Future Fed Expectations
|Probability of Fed Funds rate increase on May 3, 2017||13%|
|Probability of Fed Funds rate increase on June 14, 2017||57%|
**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.