US Economy and Credit Markets Week Ended January 23, 2015

Treasury prices experienced a twist over the course of the week as long term Treasury prices rose moderately and short term Treasury prices dropped slightly as the European Central Bank announced a stimulus program that exceeded the expectations of investors. The week started with a moderate increase in long term Treasury prices on Tuesday on renewed expectations that the Federal Reserve will raise rates this year, which caused the yield between the 2-year and the 30-year treasury to tighten. Treasury prices then dropped moderately across the maturity spectrum on Wednesday ahead of the ECB's move on stimulus as investors believed the expected stimulus was already priced in. The twist continued on Thursday when ECB President Mario Draghi announced monthly purchases of €60m and a total bond buying commitment of €1.2t. This exceed the market expectations of €50m and €1t, and investors sold short term Treasuries and bought long term Treasuries. This cause the Euro to fall against the dollar to its lowest level since 2003. Bond buying then accelerated on Friday as Treasury prices rose moderately. Oil continued to slide 7%. Major economic reports (and related consensus forecasts) for the upcoming week include: Monday: Dallas Fed Manf. Activity (3.1); Tuesday: December Durable Goods Orders (0.5%); December New Homes Sales (450,000, 2.7% MoM); Wednesday: Jan 23 MBA Mortgage Applications, Jan 28 FOMC Rate Decision (0.25%); Thursday: January 24 Initial Jobless Claims (300,000), December Pending Home Sales (0.5% MoM); Friday: 4th Quarter Annualized GDP (3.1% QoQ), 4th Quarter Annualized Personal Consumption (4.0% QoQ), January Chicago Purchasing Manager (57.9); U. of Mich. Sentiment (98.2).
Posted on Monday, January 26, 2015 @ 8:32 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.