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Taking turns

By Dwight Johnston on August 10, 2017 at 9:22 am

Nothing to worry about...

Dow futures are down about 40 points in pre-opening trading as North Korea took its turn last night in ramping up the rhetoric. There was nothing too new in what North Korea said, other than sometime this month it would send missiles over Japan and land near Guam to exhibit the country’s capabilities. Nothing to worry about there if they follow through.

Bond market snapshot

Bond prices are slightly higher this morning after traders watched a big rally yesterday turn into peanuts. The cooling of concerns yesterday cost the bond market, and the rally was further eroded with buyers failed to show up for the Treasury’s 10-year auction. Dealers were expecting strong demand but instead demand was very weak. The Treasury will be back today selling a new 30-year bond. Dealers will be more cautious about this one.

Economic reports calendar

Weekly Jobless Claims rose 4k to 244k. The Producer Price Index is also out, and the index came in lower than expected. The core rate declined .1% vs. the expected gain of .2%. The market isn’t reacting to this as PPI has long ago lost its connection to CPI. CPI will be released tomorrow. 

I had a red circle on the calendar around tomorrow’s Consumer Price Index release. I thought this would be of major importance and help to shape expectations about Fed policy. Perhaps CPI will still be a big deal, but it might have to be something that is looked at in hindsight. Based on what North Korea said last night and lord knows what Trump might say in response today, traders will likely spend August worrying much more about North Korea than CPI.

Seen it all, heard it all before

But let’s end on a positive note. I’ve seen several articles the last two days from reporters in Guam and South Korea. The articles all similarly report that the people there are not really that worried about the latest flare-up. They have seen it all and heard it all before, except for the one comment from Trump. They haven’t heard that from any president. But the people of Guam and South Korea seem to be taking this in stride and leaving the freaking out to Americans. 

Opening market reads

  • The 2-year is 1.34%
  • The 5-year is 1.80%
  • The 10-year is up 2/32s at 2.235%
  • The 30-year bond is higher by 4/32s at 2.815%
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