| Thursday, August 31, 2017 | ||||||||
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 8/24/17 | .98 | 1.02 | 1.11 | 1.23 | 1.33 | 1.47 | 1.78 | 2.01 | 2.19 | 2.53 | 2.77 |
| 8/25/17 | .99 | 1.03 | 1.11 | 1.23 | 1.35 | 1.47 | 1.77 | 2.00 | 2.17 | 2.51 | 2.75 |
| 8/28/17 | .99 | .98 | 1.12 | 1.24 | 1.33 | 1.46 | 1.74 | 1.99 | 2.16 | 2.51 | 2.76 |
| 8/29/17 | .96 | 1.03 | 1.13 | 1.23 | 1.33 | 1.43 | 1.70 | 1.96 | 2.13 | 2.48 | 2.74 |
| 8/30/17 | .96 | 1.03 | 1.11 | 1.23 | 1.33 | 1.44 | 1.72 | 1.97 | 2.15 | 2.49 | 2.75 |
Source: U.S. Department of the Treasury, as of 8/30/17
Markets Remain Calm Despite Uncertainties
The Hurricane Harvey destruction of South Texas is heartbreaking and the relief efforts are massive. We are told by FEMA that it will take years to recover. It is impossible to quantify the human physical and psychological suffering of the millions living through it. It is also impossible to estimate the financial cost of the storms. There has been nothing like it in our recorded history. Analysts are attempting to calculate financial impacts in many parts of the economy.
The Houston area refines about 40% of U.S. Gasoline so it is to be expected the price would rise. The price of Gasoline on the NY Merc has jumped about 18% in the past few days (see chart below). Oil futures are down slightly, observers citing the inability to deliver crude to the refineries. Gold prices jumped a little on the North Korea threat, but the nearby futures price is only up about 8% from July.
Bond yields moved down to the lows for the year in the 5-30 year maturities, in a moderate “flight to quality”. As worry about the U.S. debt ceiling builds ahead of September 29th, the Treasury’s debt limit deadline, funny things are happening in the short T-Bill market. There is a blip in the October 5th- 19th maturities. They are trading around 1.10%, about equal to the 6-month yield. The distortion seems to be explained by the expectation of traders that there is a risk of a temporary U.S. default on Treasury debt around 30 days from today. If the debt ceiling stops borrowing, how is Federal relief money going to go to Houston?
The bond and equity markets volatility remain at the lowest levels in ten years. In bonds, volatility as measured by the Merrill Lynch MOVE Index is about 42% below the average for the past 10 years. In equities, the VIX Index volatility measure is about 44% below the 10 year average. With North Korea threatening the world with bizarre nuclear ambitions and missile tests one would expect a little more market apprehension. It has been a relatively quiet August for stocks and bonds. Will there be an October surprise?
Gasoline Futures-September 2017 (NYME)
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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