Feeling confident

By Dwight Johnston on March 13, 2018 at 9:31 am

CPI report release

Other than the narrow Dow 30 index, stocks did little yesterday. Bond trading was quiet as well as prices edged slightly higher. The CPI report is out, but it’s not something that should trigger any great call to action.

The headline CPI index came in .2% after last month’s .5% reading, and the core rate rose the expected .2% after last month’s .3% reading. The only slight positive was the core year-over-year rate was unchanged at 1.8%. This will be the last “easy” year-over-year comparison. Next month a -.1% falls off the 12-month look back, and another .2% increase in the core rate would boost the year-over-year comparison to 2.1%.

Bond market snapshot

The Dow did make a sudden move higher from +55 to +150, but this might be related to something other than CPI. Bond prices also moved higher on the report, which makes no sense at all other than the fact that traders are very long treasuries from yesterday’s auctions, and they want profits. Bonds also got a lift from the announcement that Secretary of State Rex Tillerson has resigned. That was something that everyone knew was inevitable.

The Treasury auctioned 3-year and 10-year notes yesterday, and demand was subpar. Traders didn’t seem bothered by this. Today the Treasury will be back in to auction 30-year bonds. If demand is weak again, traders might be a bit more concerned.

Watch for rates moving higher

Speaking of demand, Bloomberg ran an article this morning on money market accounts and how yields are rising but still lagging T-bill rates. Money managers are beginning to see a lot of pressure to move rates higher. This is something you should watch for. Competition for short-term funds could get a lot more expensive.

Economic report releases

There was one other minor economic release this morning. Last week Consumer Confidence rose to a 17-year high. The morning the National Federation of Independent Businesses released its confidence poll of small businesses, and businesses one-upped consumers on the confidence scale. The poll rose to the highest level since 1983. These confidence polls don’t always translate into actions, but there is no shortage of confidence in the U.S. economy to deter anyone who is looking to expand.

Opening market reads

  • The 2-year is 2.25%
  • The 5-year is 2.61%
  • The 10-year is up 7/32 to yield 2.84%
  • The 30-year bond is higher by 16/32 to yield 3.11%




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