US Tsys are lower/steeper, Tsy futures underperform on above avg volume. Risk off, global stocks better (save China CSI 300 and Mexico), EGBs lower, Bunds lower/steeper, US Swap and US MBS spds tighter, USD higher vs ccy majors. Big news was Yellen’s double down on “later this yr” for liftoff. Said, first hike will have “only minor implications” for fin cond, econ, unempl rate is “likely to continue to fall” and headwinds “will continue to fade…boosting the economy’s underlying strength.” Also said FOMC has “not yet fully attained” objectives, some slack in labor mkts. Said “Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year,” then gradual hikes later. Tsys lower in Tokyo but quickly found support though. London saw prices ebb further, in line with Gilts and Bunds while carry over sales were seen in 10Y. Ahead of NY open huge 34K lot was blocked in bunds, said to be fat finger other say EFP trade. (MNI)
Janet Yellen Says Fed Is Likely to Raise Interest Rates This Year (NYTImes) The Federal Reserve still intends to raise its benchmark interest rate this year, barring unpleasant surprises, the Fed chairwoman, Janet L. Yellen, said on Thursday. Ms. Yellen, speaking a week after the Fed announced it was not ready to raise interest rates just yet, reiterated that the central bank was not planning to wait much longer. She said that labor market conditions were improving and that the Fed expected inflation to follow.
Yellen ‘felt dehydrated’ after long speech (CNBC) Federal Reserve Chair Janet Yellen is said to be OK after receiving medical attention following a speech at the University of Massachusetts at Amherst on Thursday. “Chair Yellen felt dehydrated at the end of a long speech under bright lights. As a precaution, she was seen by EMT staff on-site at U-Mass Amherst. She felt fine afterward and has continued with her schedule Thursday evening,” the Fed said in a statement.
Japan Prices Fall in August, the First Time in Over Two Years (WSJ) Prices fell in Japan for the first time in over two years in August, a possible setback to Prime Minister Shinzo Abe’s quest to liberate the economy from the grip of deflation.
Economy in U.S. Picked Up on Consumer Spending, Construction (Bloomberg) The world’s largest economy expanded more than previously forecast in the second quarter, boosted by gains in consumer spending and construction that may help the U.S. withstand a global slowdown. Gross domestic product rose at a 3.9 percent annualized rate, compared with a prior estimate of 3.7 percent, Commerce Department figures showed Friday in Washington. The median forecast of 76 economists surveyed by Bloomberg called for a 3.7 percent gain.
European Stocks Rebound as Yellen Clarifies Fed Rate Policy (Bloomberg) European stocks jumped from an eight-month low after Federal Reserve Chair Janet Yellen said she’s ready to raise rates this year, indicating recent market turmoil won’t derail the U.S. recovery.
Overview: IG24 5Y 81.014/81.558 (-0.312), US 10yr note futures are down -0.38% at 127-20+, S&P 500 futures are up +1.15% at 1940.75, Crude oil futures are up +0.91% at 45.32, Gold futures are down -0.87% at $1143.8, DXY is up +0.51% at 96.481.
US Economic Data
- GDP annualized QoQ grew 3.9% in 2Q 2015 higher than previously reported 3.7% increase.
- Personal consumption came in at 3.6% for 2Q 2015 vs 3.1% for previous release.
- GDP price index and Core PCE QoQ for 2Q 2015 were 2.1% and 1.9% that is 0.1% higher for Core PCE vs previous release.
- Markit US Services PMI (Preliminary) is forecast at 55.6 for September, 0.5 point lower than previous month.
- University of Michigan confidence (Final) is expected at 86.5 in September 0.8 point higher than preliminary report.
Canadian Economic Data
- There is no major economic data today.
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Ivan Greenstein, Stephan Buu, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240