Rates start the week by drifting slightly lower

___

Published Date 11/6/2017

Stock and bond markets opened quietly this morning. The 10 yr. note yield early at 2.32% -1 bp and trading at its near-term technical resistance. Stock indexes fractionally higher in the futures markets.

Last week was a big week for key economic releases: the Republicans revealed the tax cut details and the FOMC meeting. This week, very little data to look at; the week’s headline is the quarterly refunding from Treasury, issuing new 3 yr., 10 yr. and 30 yr. notes and bonds on Tuesday, Wednesday, and Thursday respectively. House Republicans last week unveiled the first draft of a 429-page tax bill that, if enacted, would be the biggest overhaul of the U.S. tax system since the 1980s; now beginning to do the revisions that were widely expected as differences increase. The idea is still to pass the bill in the House by Thanksgiving.

Wm. Dudley, NY Fed Pres and the most important regional Fed President announced he will resign in mid-2018 before his term ends in 2019. The NY Fed President is a permanent member of the FOMC and a hawk towards higher rates. Next year, the Fed will be difficult to handicap with a new Chair, a new NY Pres. and three other Fed governor seats that have been vacant for about two years. He recently commented that stopping rate increases at this point could be dangerous for the economy. His stance echoes that of other senior central bankers who worry that with the jobless rate near levels seen as natural in a properly-functioning economy, there is a rising risk of inflation overshoots.

In Saudi Arabia, a purge of the elite, an anti-corruption that is just beginning with the new Crown Prince moving to consolidate his power. Dozens of princes, ministers, and prominent businessmen have reportedly been arrested as part of the purge, including billionaire investor Prince Alwaleed bin Talal, one of the world’s richest men and a significant investor in Twitter, Citigroup and many other international companies, people aware of the matter said. The direct US result for consumers, higher oil prices: crude at a 2 yr. high this morning.

This morning, after a nice rally in the 10 yr. and MBS prices last week, the 10 is at another key resistance level at 2.32%. Longtime readers know the technical significance at 2.32%. The 10 yield now under its 20-day average and at its 40-day average this morning. However, once again, bond prices and mortgage rates depend now on whether the stock indexes either increase or experience selling that will set the tone the rest of the day. The S&P and NASDAQ already made new intraday highs this morning.

This Week’s Calendar:

Tuesday

7:00 am NFIB small business optimism index (105.0 from 103.0)
10:00 am September JOLTS job openings (6.082 mil from 6.08 mil in August)
1:00 pm $24B 3 yr. note auction
3:00 pm September consumer credit data (+$17.4B)

Wednesday

7:00 am weekly MBA mortgage applications
1:00 pm $23B 10 yr. note auction

Thursday

8:30 am weekly jobless claims
10:00 am September wholesale inventories (+0.3%)
1:00 pm $15B 30 yr. bond auction

Friday

10:00 am November preliminary U. of Michigan consumer sentiment index (100.0 from 100.7 at the end of October)
2:00 pm October Treasury budget balance (_$56.1B)

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.