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Fixed Income Market Commentary by Kevin Giddis

August 14, 2018

The Treasury market is trading slightly higher this morning as traders seem to be playing the current events pretty close to the vest. Those “events” could be anything from Turkey to tariffs to the dollar. Some of the concern about Turkey has dropped a bit, pushing risk back into the market, but the effects of existing and proposed tariffs linger. The movement in the dollar simply makes the Treasury trade a better one in the eyes of those buying as a safe haven trade or as a longer term play. The risk-on feel appears to be helping the equity market this morning, so it wouldn’t be a big surprise to see yields rise today, especially out on the longer end of the curve. This current run to Treasuries is almost all about geo risk vs. fundamental data. Tomorrow we will get Nonfarm Productivity, Retail Sales, Unit Labor Costs, Industrial Production and Capacity Utilization. It is doubtful that any of these numbers will take the bond market out of its current range, but we can always hope! This is the part in which I would say, “moving along”, but there really isn’t a place to go. What activity we are seeing is likely to protect portfolios vs. entering or exiting the Treasury market based on some form of market revelation. I guess we could talk about the impact that Import Prices for July had on the market, but the number came in flat and the Treasury curve didn’t budge. It’s days like this that cause me to refer to the “number of that truck driving school,” so hopefully something will take us out of what looks to be a low volume, low vol trading pattern. Maybe it’s because we are in the last two weeks of summer, and investors would rather be on vacation vs. grinding it out in a ‘two-tick” market. Heck, even the Fed is quiet. The next speech isn’t until the 20th! So this really leaves us to get as much as we can from global events, comments about the dollar, and any kind of surprise from the upcoming economic data. If I were a millennial, this is where I would say: Ugh!

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