S&P and Dow close at record levels again

Nasdaq 1.9% from the all time high

The major indices are all closing higher and near highs for the day/week. The S&P and Dow industrial average both closed at record highs. The NASDAQ index is just under 2% away from the all time high.

The major indices also closed higher for the week with the NASDAQ index leading the charge at up 3.12%.
The final numbers are showing:
  • S&P index +31.58 points or 0.77% at 4128.75. The high reached 4129.48 which is the all time high for the pair.
  • Nasdaq +70.878 points or 0.51% at 13900.18. The all-time high price is at 14175.12. The index is 275 points from the all time high putting the index about 1.9% from the all time high
  • Dow rose 298.68 points or 0.89% at 33801.25. That was just off the high for the week at 33810.87 (which is also the all time high).
For the week, the Nasdaq led. The Dow lagged but was still higher. The Russell 2000 index of small cap stocks fell -0.56%.  The Nasdaq was up 3.12%.
Helping in the US was lower /steady rates despite the rise in rates today. Below are the changes for the week.  The largest decline was in the 5 year sector with a decline of 11.59 basis points. The 10 year is down -6.49 basis points (rates are up about 4 bps today).  Next week the US treasury will be auctioning of reopened 3, 10 and 30 year issues.

US treasury to auction off $25 billion of 20 year bonds next week

Expectations were for a $23 billion auction

As the treasury auctions continue at an increasing pace, the US treasury has a announced that they will auction off $25 billion of 20 year bonds next week. That was higher than the 23 billion expected.

Later today the treasury will complete their refunding for the week with the sale of $26 billion of 30 year bonds. The auction will take place at 1 PM ET.  The current WI yield is trading at 1.375%

Are climbing bond yields about supply or demand?

US Treasury yields climb ahead of auctions

US Treasury yields climb ahead of auctions
It’s a big week in the Treasury market with record-high sales starting with three-year notes today.
With that, Treasury yields have jumped higher. US 10-year notes are up 6.4 bps to 0.6415% today. That’s after hitting a low of 0.5036% last week. The turn in the market came on the refunding announcement as coupon-issues were upsized and now we’re left to ponder what the latest move means.
The optimistic take is that this signals improvement on the virus and the economy. The other side of the argument is that a flood of bonds is going to push up rates.
I’m more sympathetic to the optimistic side, if only because Trump’s executive orders mean that more stimulus spending is less likely and will probably be lower. At the same time, a capital gains cut would blow another hole in the budget.
What does it mean for the US dollar? It’s positive.
BMO today highlights that even at 0.16%, US three-year notes are relatively attractive.
While the past few sessions’ concession will aid the takedown of this afternoon’s offering, at just 16 bp, 3-year yields are not abundantly cheap on an outright basis. However, when compared to overseas yields that have pushed to extremely negative territory, there is an argument to be made that the still-positive nominal rate on Treasuries will increasingly drive foreign interest.
At the same time, they see this latest move as more about supply than a ‘fundamental rethink’ of the econoy.
So the overall message from bonds right now is murky and it’s risky to take any big signals in mid-August.

Pelosi confirms US coronavirus economic rescue package talks to continue Tuesday

  • U.S. House Speaker Nancy Pelosi

  • Treasury Secretary Steven Mnuchin
  • White House Chief of Staff Mark Meadows
will meet again on Tuesday for further talks on the next around of coronavirus economic aid.
Pelosi said the talks Monday had been productive

Treasury yields turn flat across the curve, risk currencies pare gains

10-year Treasury yields are now flat on the session


The early trading in the bond market is hinting at some indecision about the risk mood. Treasury yields turned flatter about two hours ago before recovering some poise and is now back to flat levels again on the session.
As a result, USD/JPY has pared gains to 109.81 currently and we are seeing a similar story for the aussie as AUD/USD falls to a session low of 0.6743 after having traded around 0.67455-65 earlier in the day – just take note AUD/JPY is at key resistance levels as well.
European equities have pared back some of its earlier gains too but are still keeping higher in trading so far. This may yet lead to some mixed tones between stocks and bonds again but just be mindful of the market saying that “the bond market is always right”.

ICYMI: Mnuchin says yuan will be in focus in next round of China talks

An overnight report on comments from US Treasury Secretary Mnuchin

  • “I expect the governor of the People’s Bank of China to come over for these talks,” Mnuchin told reporters Monday. “So part of the conversations we will be having with them is around currency and currency manipulation.”
Via Politico (more at the link, but the quote above is the gist of it)
An overnight report on comments from US Treasury Secretary Mnuchin

US Treas Sec Mnuchin warns that debt ceiling could be hit in September

The debt ceiling drums are being beat again, US Treasury Secretary Mnuchin warned that it’d be hit in September.

  • “We model various scenarios for cash projections. Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,” “it is impossible to identify precisely how long extraordinary measures [to avoid default] will last.”
The administration wants to borrow more, increase debt in the US. The usual.
House Speaker Pelosi and Senate Majority Leader McConnell want to rasiet eh ceiling as per Mnuchin’s request, but want it as part of a broader, two-year budget agreement.
Discussions on the timetable will continue this week.
The debt ceiling drums are being beat again, US Treasury Secretary Mnuchin warned that it'd be hit in September.
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