Morning Market Update: December 13, 2018

Treasurys Sell Off While Equities Rise on Strong Inflation Data

Commentary for Wednesday: Treasurys sold off as equities increased. Yields were initially higher in choppy overnight trading and throughout the early morning. Yields briefly jumped following the release of economic data on inflation that was in-line with expectations but were volatile the remainder of the morning. Yields trended lower after a Treasury auction on 10-year notes but stabilized before close with the curve modestly steeper. 

This Morning: Treasury yields are shifting lower following the release of economic data that reported a weaker-than-expected import price index.

The Mortgage Bankers' Association reported applications for home mortgages rose 1.6% week-over-week. The purchase index increased 3.0% from the week prior, while the refinance index increased 2.0% week-over-week to its highest level since March 2018. Further, the average interest rate on a 30-year fixed-rate conforming mortgage fell 12 basis points to 4.96%. 

The Consumer Price Index was in-line with expectations and was flat in November. On a year-over-year basis, CPI is up 2.2%. Food prices increased 0.2%, which were offset by energy prices falling 2.2%. Further, shelter prices rose 0.3%, while transportation services fell 0.3%. Excluding food and energy, the index increased 0.2% from the prior month, but is still up 2.2% year-over-year. 

Americans expect to spend an estimated $885 on gifts this holiday season, according to a recent poll by Gallop. This is slightly below $906 in 2017. The same poll shows that 33% of Americans plan to spend at least $1,000 on Christmas gifts, while 22% will spend between $500 and $999, 29% will spend less than $500, and just 3% will spend less than $100. Additionally, another survey by Bankrate found that 45% of shoppers expect to spend beyond their normal comfort zone.

 Financial Markets Research

The morning market update is provided by: 

solutionsheadshots_hotchkiss_smJames Hotchkiss
Director, Member Strategy and Solutions

SolutionsHeadshots_Deven_smMelissa Deven
Director, Member Strategy and Solutions


The data and valuations provided in this document are for information purposes only and are provided as an accommodation and without charge. The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this document. This document is not intended to constitute legal, investment, or financial advice or the rendering of legal, consulting, or other professional services of any kind.

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