FinSer 

 Financial Focus
August 5, 2022 
 

GOOD MORNING! Probably the biggest market news that got little press was the West Texas Intermediate (WTI) futures contract sliding down to price levels just prior to Russia’s invasion of Ukraine (attached). One would think it would lower inflation expectations and support the longer end of the Treasury yield curve. However, it appears to have had little effect as the markets remained cautious while following developments in the Taiwan Strait. In addition to wanting to wait to see this morning’s July employment report made for a low volume day in which made for quick whippy moves and illiquid conditions in thin trading in Treasuries. Once again, heavy corporate issuance may have kept volume down in Treasuries. The first week of August may hit the total expected to be issued for all the month as corporate Treasurers go from announcing quarterly earnings and then go direct to the corporate new issue arena and sell debt for stock buybacks and dividends. Caution, however, underpinned the tone in treasuries and kept yields slightly lower on the session. Stocks also wobbled but gold had a nice day on geo-political tensions, ongoing political chaos in the United Kingdom and Italy, and a softer dollar.
     Amid escalating tensions between the US and China over Taiwan, the markets are treading water and holding its breath in early trading ahead of the July employment report. While many market participants and pundits believe this may be a key report in the debate of a recession with a Fed pivot away from hawkishness or no recession and no Fed pivot. Based on Bloomberg’s survey of economists, most believe it will show of a trend of slowing but strong employment. Non-farm payrolls are expected to increase in the 235k to 250k range (down from the unrevised 372k in June) and the unemployment rate to hold at a low 3.6%. A review of the estimates reveals a wide range above and below, which is to be expected from economists after all. As the old joke goes, if you ask 3 economists a question, you will get 3 different answers, 4 if one went to Harvard. Volatility should follow the release until this afternoon when positioning for the weekend in a dangerous develops.

GENERAL
TODAY             
PREVIOUS        
FED FUNDS
2.25% to 2.50% 2.25% to 2.50%
S & P 500
4151.94 4177.77
GOLD
1801.00 1797.10
YEN
133.13 134.16
EURO
1.0236 1.0194
WEST TEXAS CRUDE
88.54 90.66
T-BILLS
YIELD                
YIELD                 
3 MONTH
2.40 2.45
6 MONTH 2.93 2.94
1 YEAR
3.07 3.11
T-NOTES / BONDS
YIELD                 
YIELD                  
2 YEAR
3.06 3.10
3 YEAR 2.99 3.05
5 YEAR 2.80 2.85
10 YEAR
2.69 2.73
30 YEAR 2.97 2.97

                                                                 Data Source: Bloomberg Financial Markets 
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