Morning Market Update: October 19, 2018

Treasury Yields Shift Lower as Equities Fall  

Commentary for Thursday: Treasurys rallied while equities ended lower. Yields were initially modestly higher in quiet overnight trading and remained little changed despite the release of strong economic data. Yields dropped mid-morning following one Treasury auction and a speech from St. Louis Fed President Bullard. Yields continued lower throughout the afternoon as trade tensions reappeared. 

This Morning: Treasury yields are shifting higher ahead of economic data to be released on existing home sales. 

Initial jobless claims decreased by 5K to 210K in the week ending October 12. The prior week was upwardly revised by 1K to 215K. The 4-week moving average edged higher by 2K to 211.75K, its highest level since August 31, 2018. Similarly, continuing claims fell by 13K to 1.640M in the week ending October 5 while the prior week was downwardly revised from 1.660M to 1.653M. The 4-week moving average fell by 1.25K to 1.653M, its lowest level since August 18, 1973. The insured unemployment rate held steady at 1.2%. 

The Philadelphia Fed Business Outlook fell by a less-than-expected 0.7 points to 22.2 in September. Nearly 36% of respondents reported increases in overall activity, while 14% reported decreases. The new orders index fell 2.0 points to 19.3, and the current shipments index increased 5.0 points to 24.5. 

In a speech on Thursday, Federal Reserve Vice Chairman for Supervision Quarles spoke on the economic outlook. He stated, "I am optimistic about potential growth, and I expect that even relatively strong growth can be met without running into economic constraints." He continued, "Anchored inflation expectations might mask the inflation signal coming from an overheated economy for a period, but I have no doubt that prices would eventually move up in response to resource constraints."

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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