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Daily Commentary

Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.

Wednesday, November 25, 2020 at 8:00 am ET
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Alloya Investment Services

Market Indications

Historic Treasury CUreves as of November 23, 2020

Other Market Indicators

Market Indicators  
2s/5s Tsy Spread0.230.00
2s/10s Tsy Spread0.71-0.01
2s/30s Tsy Spread 1.43-0.01
DJIA-30 30,046.24+454.97
NASDAQ 12,036.79+156.15
S&P-500 3,635.41+57.82
Dollar Idx 92.22+0.00
CRB Idx 159.79+2.46

Daily Commentary

Recap – With the election in the rearview mirror and a vaccine on the horizon, animal spirits are running crazy high. On the day, the three major indices racked up gains of over 1.50%. Notably, the Dow Jones breached the 30,000 milestone. President Trump called it a “sacred number”. Year-to-date, the Dow is higher by 5.28% and the S&P is up 12.52%, while the tech-laden NASDAQ has risen 34.15%. From my lens, we do have a market on our hands that looks egregiously overpriced, overbought and overextended.

In the commodity space, West Texas Intermediate (WTI) continues to rally and is now trading at $45.31 per barrel, the highest level since early March. Elsewhere, bond markets continue to trade defensively with the 10-year Treasury yield continuing to drift higher, closing the session at 0.881%. Yet one has to be impressed with how well the Treasury market has hung in during this intense risk-on trade in equities, credit and commodities. The yield on the 10-year Treasury, at 0.88%, is still well within the range of the nearby low of 0.54% and high of 1.18%.

The pandemic continues to run almost uncontrolled across the U.S. Texas reported a record number of cases yesterday, while California's top health official warned that daily deaths from the virus could hit a new high by Christmas. In Europe, German Chancellor Angela Merkel is proposing further tightening of the country's restrictions, while French President Emmanuel Macron said he will gradually lift a nationwide lockdown from Saturday.

On the docket today, it’s a jam-packed day for economic data. We have initial jobless claims, which are expected to come in at 730,000, slightly lower than last week, with continuing claims dropping to 6 million. In addition, the second reading of Quarter 3 GDP and durable goods orders are also due. Personal income and spending data, new home sales, and core Personal Consumption Expenditures (PCE) are at 10:00 am ET. At 2:00 pm ET, the minutes from the November 5 Federal Reserve meeting are published.

In advance of Turkey Day, global equity markets are taking a breather as investors wait for a raft of economic news. Overnight, the MSCI Asia Pacific Index was broadly unchanged, while Japan's Topix Index closed 0.2% higher. In Europe, the Stoxx 600 index was modestly in the red, whereas S&P 500 futures pointed to a small decline at the open. In bond land, markets are relatively quiet with a modest bid. Currently, the 10-year Treasury yield is 0.875% and the long bond is 1.602%. On the front end of the curve, twos and fives are yielding 0.155% and 0.389% respectively.

As I count my blessings and give thanks for all that my family has, please remember how hard these times are for our neighbors. Wishing all a happy and healthy Thanksgiving.

Economic Calendar

November 23 - 26, 2020: The Week Ahead

Economic Calendar week of November 23-26, 2020

Future Fed Expectations

Source: Bloomberg

Expected Fed Funds PAth as of November 23, 2020


Select Probabilities based on the Futures 
Probability of Fed Funds rate CUT on December 16, 20204%
Probability of Fed Funds rate CUT on January 27, 20210%

**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 Alloya Investment Services to discuss your specific situation and objectives.