Morning Market Update: May 22, 2019

Treasury Yields Shift Higher as Equities Rebound

Commentary for Tuesday: Treasurys sold off while equities increased on the day. Yields were initially little changed in choppy overnight trading and trended higher in the early morning despite economic data released that reported weaker-than-expected existing home sales. One Treasury auction and two Fed speeches shifted yields modestly lower the remainder of the morning. They were little changed the remainder of the session and closed with the curve flatter as investors look ahead to the upcoming release of the FOMC's meeting minutes.

This Morning: Treasury yields are shifting lower with no economic data releases to direct market activity.

Existing home sales declined 0.4% month-over-month to an annual rate of 5.19M sales. As a result, total sales are down 4.4% from one year ago. By region, sales in the South fell 0.4%, the West grew 1.8%, the Northeast dropped 4.5%, and the Midwest was relatively unchanged. Elsewhere in the report, total resales on the market (an indicator of housing supply) jumped 9.6% to 1.83M, which increased the inventory from 3.8 months in March to 4.2 months in April. 

Chicago Fed President Evans spoke Tuesday on the Economy and Monetary Policy. He commented, "If the Fed has been undershooting the inflation target and wants to make up for that, then an overshoot is needed for successful price-level targeting." 

In a speech on Tuesday, Boston Fed President Rosengren stated, "While my baseline forecast assumes that a trade agreement will occur without seriously disrupting global trade or global economies, it may be some time before that uncertainty is resolved." He also said, "I see no clarion call to alter current policy in the near term. I view current policy as slightly accommodative and likely to be consistent with inflation returning to the Fed's 2% inflation target over time."

Financial Markets Research

The morning market update is provided by: 

solutionsheadshots_hotchkiss_smJames Hotchkiss
Director, Member Strategy and Solutions

SolutionsHeadshots_Deven_smMelissa Deven
Director, Member Strategy and Solutions


The data and valuations provided in this document are for information purposes only and are provided as an accommodation and without charge. The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this document. This document is not intended to constitute legal, investment, or financial advice or the rendering of legal, consulting, or other professional services of any kind.

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