Daily Market Commentary

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Weekly Relative Value

Published at the top of each week by Balance Sheet Solutions, Weekly Relative Value tracks market and economic trends, analyzes key releases and watches ongoing political developments.  

Commentary prepared by Balance Sheet Solutions, LLC, a wholly owned CUSO of Alloya Corporate Federal Credit Union. Balance Sheet Solutions is a leading broker/dealer, investment advisor and ALM risk management consultant to credit unions.

Wednesday, June 21, 2017 at 8:00 a.m. CST
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Balance Sheet Solutions

Market Indications

Other Market Indicators

2s/5s Tsy Spread 0.41 0.00
2s/10s Tsy Spread 0.81 0.00
2s/30s Tsy Spread 1.39 -0.01
DJIA-30 21467.14 -61.45
NASDAQ 6188.03 -50.98
S&P-500 2437.03 -16.43
Dollar Idx 97.67 -0.09
CRB Idx 169.66 -1.62


Today's Market Commentary

Recap – Oil was one of the major market movers yesterday. West Texas Intermediate fell -2.19% yesterday to close at $43.23 per barrel. That means it has now fallen a little over 20% from its highs back in February – and therefore slipping into the definition of a bear market. So, these are stressed levels relative to the past decade or so. The move appeared to be an extension of the slide that we’ve seen for the last few months now with markets questioning the impact of the OPEC-led output cuts and a reinvigorated U.S. shale market. Risk assets were hit hard too as a result. The S&P 500 (-0.67%) suffered its biggest decline since May 17. Meanwhile, bond yields fell in tow with the benchmark 10-year Treasury yield, ending the day three basis points lower at 2.15%.

Economic Data – In terms of the limited macro data out yesterday in the U.S., the current account deficit for Q1 revealed a deficit of 2.5% of GDP during the quarter, which is on par with the average seen over the past eight years.

Fedspeak – It was also a busy day over at the Fed. The Chicago Fed’s Charles Evans spoke again and said that he was a little nervous on inflation, but overall still positive about the U.S. economy. He also suggested that the Fed could wait until December before deciding whether to tighten again. Vice-Chair Stanley Fischer acknowledged that low rates have contributed to rising house prices in certain countries, while the Boston Fed’s Rosengren voiced some concerns about financial stability risks as a result of a long period of low rates.

Short on Detail – Meanwhile, House Speaker Paul Ryan delivered his eagerly awaited tax speech, but it ended up being short on exciting details for markets. Ryan emphasized that the current administration is “going to fix this nation’s tax code once and for all,” while also saying that “we need to get this done by 2017.” It’s worth noting that Ryan avoided the much-debated border adjusted tax issue, although in a TV interview he did note that the boarder adjustment tax (BAT) isn’t dead, but that officials are also working on possible alternative proposals.

Looking at the day ahead, we will get U.S. existing home sales for May. The consensus forecast is for sales to decline by 0.4% to a 5.55 million annualized rate.


Economic Calendar

June 19 - 23, 2017: The Week Ahead

Future Fed Expectations
Sources: Bloomberg


Select Probabilities based on the Futures

Probability of Fed Funds rate increase on July 26, 2017 0%
Probability of Fed Funds rate increase on September 20, 2017 21%

**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.

The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Balance Sheet Solutions to discuss your specific situation and objectives.