US Economy and Credit Markets Ended May 14, 2017
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Treasury prices dropped significantly to begin the week before rebounding and ending slightly higher. The election of Emmanuel Macron in France on Sunday caused yields to move higher during the first few days of the week as investors embraced a risk-on mentality as geopolitical concerns related to France possibly exiting the European Union lessened. Demand was also weak for auctions of 3-year and 10-year Treasury notes on Tuesday and Wednesday respectively, causing yields to hit an 8-week high on Wednesday. Treasury prices began to rebound on Thursday as weak retail sales data caused investors to sell equities and seek the perceived safety of Treasuries. On Friday, Treasury prices rose significantly, reversing the losses from the first half of the week on poor inflation data. Investors believed inflation may be on the horizon as the Producer Price Index was higher than expected on Thursday, but Friday's Consumer Price Index came in below expectations and yields fell. Also contributing to Friday's increase in Treasury prices was weaker than expected April retail sales (0.4% MoM compared to 0.6% MoM estimates), and reduced expectations for a June rate hike according to the Chicago Mercantile Exchange's FedWatch tool. Oil also rose 4% over the course of the week after the U.S. Energy Information Administration reported that U.S. crude oil inventories dropped by 5.2M barrels last week. Major economic reports (related consensus forecasts; prior data) for the upcoming week include Monday: March Empire Manufacturing (0.2%, 0.3%); Tuesday: April Housing Starts (1.260M, 1.215M), April Industrial Production (0.4% MoM); Wednesday: May 12 MBA Mortgage Applications; Thursday: May 13 Initial Jobless Claims (240k, 236k), May Philadelphia Fed Business Optimism (18.5, 22.0), April Leading Index (0.4%, 0.4%).
Posted on Monday, May 15, 2017 @ 8:28 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.