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Fixed Income Market Commentary by Kevin Giddis

March 15, 2019

The Treasury market is trading higher this morning, but the direction for the rest of the day is less certain. While it was pretty quiet overnight, traders looked to pair off some risk and go into the weekend more “flat” than they were yesterday. On the economic front, The Empire Manufacturing Index for March came in at 3.7 vs. an expected 10.0 and last month’s 8.8. Industrial Production in February rose 0.1%, and Capacity Utilization came in at 78.2% for the same period. Later this morning we will get the University of Michigan’s Consumer Sentiment Index for the first two weeks of March, which is expected to come in at 95.6 vs. 93.8 in February. So that really leaves us marching in place today, unless a geo risk emerges or something happens that the market takes as a surprise. Realistically, the chance of that happening are about the same as my beloved Cincinnati Reds winning this year’s World Series! One problem we don’t have is garnering interest for U.S. Treasury debt. The Treasury sold close to $80 billion of 3, 10, and 30-year securities with strong interest and relative ease. Part of today’s rally in bonds may be credited with Treasury Secretary Steve Mnuchin’ s declaration that President Trump and Xi Jinping of China won’t be meeting this month, suggesting that we are still a long way from a deal. If that is the sole market mover, then it’s likely worth a ¼ of a point to the 10-year, but not much more than that, especially at the end of a week. None of this has done much to enhance volatility into the bond market. While we almost touched a near-term low at 44.5688 on Wednesday, we did bounce back to 45.2381 yesterday, but that is only a little more than throwing a deck chair off the Titanic! While Volatility remains pretty low, volume has been good, as interest in the safe haven trade simply hangs around, trading safely with the range. All in all, a good week for bonds, with predictable data and too little news to force investors into the market.


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