The Treasury auctioned $70 billion five-year notes today with a yield of 4.138%, slightly higher than the pre-auction expected yield of 4.12%. This compares to a 3.519% rate at the September sale and is the first auction with a 4% “handle” since July.
In theory the yield should not be higher than September’s auction given expected Fed policy. Second demand should be great given current interest rates.
Is the market telegraphing yet another change in monetary policy assumptions?
Some would argue the market is suggesting a Trump victory given the prevailing wisdom that Trump would add more to the deficit than Harris, thus higher expected rates. Many do not agree with this view, stating instead that neither candidate has talked about how they would handle the deficit.
Several bulge bracket firms are forecasting a “lost decade” as the US [and the rest of the world] resolves its [their] massive deficits. Unfortunately, it may take a crisis before lawmakers commit political suicide by taking entitlements from the electorate. It is a spending problem not a revenue problem.
After the close, both META and GOOG release results. Shares are up 63% and 19%, respectively, year to date. Both companies are members of the Magnificent Seven cohort and could have an outsized impact on both psychology market direction if results are different then expectations.
Most would write that there is little room for error.
The JOLTs Job Openings, the trade gap and a sentiment indicator is released today. All data points can also influence psychology. What narrative will the data support…a slowing or expanding economy?
Last night the foreign markets were up. London was up 0.04%, Paris up 0.29% and Frankfurt up 0.28%. China was down 1.08%, Japan up 0.77% and Hang Seng up 0.49%.
Futures are flat with earnings and the election in focus. The 10-year is off 5/32 to yield 4.30%.
