Equippingyou as an Informed Investor

Fixed Income Market Commentary by Kevin Giddis

June 26, 2019

The Treasury market is trading lower this morning as investors take a bit off the table as the week progresses, the 5-year auction approaches, and comments by the Treasury Secretary give hope to a possible trade deal. He said that we were “90% the way there” when speaking about the previous U.S.-China trade deal, which pushed equity futures higher and bond prices lower. How this actually plays out is anyone’s guess, but you get a glimpse of the volatility that exists in today’s markets as well as the sensitivity. Today the Treasury will sell $41 billion of 5-year notes. This could prove to be a challenge for both the Treasury and the market because you need to convince investors that taking a 5-year Treasury at a 3 basis point give-up to the 2-year note is sound investment thinking. On the economic front, we will get Durable Goods Orders for the month of May, which are expected to fall 0.3%, but rise 0.1% when you remove the volatile Transportation Orders. None of this is going to ignite the market in either direction, especially coming off of Chairman Powell’s speech to the Council for Foreign Relations yesterday. He set the tone to build consensus for a future rate cut, if warranted, at a time that the Committee deems appropriate. His speech was designed to give support to the FOMC as a “non-political” being, while addressing when a potential rate cut should occur. This made the equity market nervous because while the bond market is predicting a rate cut by the Fed, the equity market appears to be counting on it. Bonds have tended to see this as an inflation event, with a rate cut the cherry on top. On the flip side, if we get a trade deal, bonds could sell-off hard, and stocks would likely rally, with or without a cut by the Fed. My point is that each market is cheering for different things, with different weightings, and different potential outcomes. However we look at it, this week and next week will be key to the future of near-term trading, with progress on a trade deal the most important component for each market. If the G20 disappoints, then we will likely pivot back to the Fed and the economic data.

The information contained herein is based on sources which we believe reliable but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or the solicitation of an offer to sell or buy the securities herein mentioned. This firm and/or its affiliates and/or individual shareholders and/or members of their families may have a position in the securities mentioned and may make purchases and/or sales of these securities from time to time in the open market or otherwise. Opinions expressed are our present opinions only and are subject to change without notice. Raymond James may also perform or seek to perform investment banking for entities referred to herein

Wealth Fulfillment The structured planning and process to dynamically pursue your unique objectives. Read More
Investment Management A disciplined approach to prudently growing and preserving wealth and leaving a legacy. Read More
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact our office for information and availability.
© Raymond James Financial Services, Inc., member FINRA/SIPC | Privacy policy
Investment advisory services offered through Raymond James Financial Services Advisors, Inc. WealthEngage is not a registered broker/dealer and is independent of Raymond James Financial Services.
Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website‘s users and/or members.