Fixed Income Market Commentary

Fixed Income

Fixed Income Market Commentary

Read the fixed income commentary from Executive Vice President Kevin Giddis.

October 23, 2017

The Treasury market is trading slightly lower this morning, mostly because there is very little in terms of tangible data, with the exception of who may be the next Fed chairman. There is a lot going on overseas, but those events have done little more than generate some flight to quality buying, albeit in small numbers. So if the goings-on in Spain, Brexit talks in London, or the upcoming ECB meeting doesn’t excite the U.S. government market, I guess we must turn our attention to the President’s pick to oversee the FOMC. It is pretty much down to three candidates, the current chair Janet Yellen, Fed governor Jay Powell, or Stanford economist John Taylor. While Janet Yellen has, in my opinion, done enough to keep the job, it does seem like the president wants to remove almost everything that the previous administration has done, so she may be out. That leaves Jay Powell (close to a dove) and John Taylor (definitely a hawk) as the choices. With that in mind, plus the President’s support for lower interest rates, one could deduct that going with Powell would seem to be the safe bet. But, handicapping this President is very difficult and for all I know, Gary Cohn could get the nod! For a market starved for volatility, any change could be enough to generate some interest in the yield curve again. Since September 26th, the 10-year note has traded inside of 10 basis points, high to low, and to lower than average volume. The bond market seems to be resigned to waiting for better news to trade on. Durable Goods Orders (Tuesday), New Home Sales (Wednesday) and 3rd quarter GDP (Friday) highlight a less than stellar economic calendar. Maybe the $88 billion of new supply ($26 billion 2-year notes, $34 billion 5-year notes, and $28 billion of 7-year notes) will make the week interesting. If those fail, I guess we could always sit back and listen to a number of Fed speeches this week…wait, there aren’t any! I guess that leaves us with the prospect for tax reform and how large the budget deficit is getting. Enjoy the ride. 

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.

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