The Weekly Report


  • Another Friday risk-off move, partly on weaker EU data and also profit taking in case the weekend produces a flurry of bad news. With large volumes trading in 30-minute intervals around the clock, a weekend now looms larger for risk management even if there’s no reason to suspect bad news might appear. Rates would be lower if not for the good labor market report in January. Stocks are down about .6%, and rates are bull flattening. Almost of the rate change, as seen on page 4, is from lower term premiums.
  • The first article starts by tracking daily reporting of coronavirus cases in China, looking at severe cases (15% of total), those outside the Hubei province (not many), and a daily increase in cases that is still terribly high. Besides the obvious pressure on oil, industrial metal and ag commodity prices are taking direct hits that speak to investor concern about a rebound in Chinese growth in the first half of this year. Our chart on UST 10-yr volumes at yield is updated with a fresh starting point of January 3 to focus on the last six weeks.
  • For the first time in several years, traders have to work to keep up with all the changes going on in Treasury debt management. The new 20-yr is just the half of it. Policy changes on Treasury bills and the potential new SOFR floater create additional flexibility for Treasury officials to manage next year’s increase in maturity rollovers without over committing now in case the deficit does come in as low as FHN Financial’s new estimates.
  • Last, a review of January performance for bonds and stocks. Credit held in surprisingly well given the volatility, while the 7-yr produced the best risk-adjusted returns on the curve.
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