US Economy and Credit Markets Ended March 30, 2018

 
Yields continued to fall early last week as fears of a trade war resurfaced. Notably, the benchmark 10-year Treasury note yield closed below 2.80% for the first time in seven weeks. Strong economic data later in the week supported the Federal Reserve's recent upward revision for growth prospects in coming months and Treasuries retreated. The final reading for fourth quarter QDP growth was revised up to 2.9% from an initial 2.5%, exceeding the expected revision to 2.7%. Consumer spending and business investment were positive contributors to the revisions. The PCE deflator rose to 1.8% in February, surpassing the expected 1.7% increase. University of Michigan Consumer Sentiment recorded the highest level in March since 2004. The first quarter saw yields rise by 39 bps on the 6-month T-bill, 38 bps on the 2-year note, and 33 bps on the 10-year. The 6-month T-bill yield is used as a proxy for a cash equivalent and surpassed the dividend yield on the S&P 500 in March for the first time since 2008. The 2-year Treasury note is the most sensitive to Federal Reserve monetary policy and has risen 100 bps since September 2017. The spread between the 10-year and 2-year has narrowed to 47 bps, the lowest since October 2007. The week ahead has a heavy economic calendar including Friday's March employment report which is expected to report a decrease in the unemployment rate to 4.0% and an increase in average hourly earnings. Other major economic reports (related consensus forecasts, prior data) for the upcoming week include: Monday: March final Markit US Manufacturing PMI (55.7, 55.7), February Construction Spending MoM (0.4%, 0.0%), March ISM Manufacturing (60.0, 60.8); Wednesday: March 30 MBA Mortgage Applications (N/A, 4.8%), March ADP Employment Change (205k, 235k), February Factor Orders (1.7%, -1.4%), February final Durable Goods Orders (N/A, 3.1%); Thursday: March 31 Initial Jobless Claims (N/A, 215k), February Trade Balance ($-56.5b, $-56.6b); Friday: March Change in Nonfarm Payrolls (189k, 313k) and March Unemployment Rate (4.0%, 4.1%).
Posted on Monday, April 2, 2018 @ 8:21 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.