Strong Demand for Treasury Securities
INTEREST RATE MARKET FUTURES
The Treasury will auction $38 billion of 10-year notes today.
Yesterday’s auction of $42 billion of 3-year notes resulted in a lower yield compared to the July offering, indicating strong demand for Treasury securities.
Most market participants still see the Federal Reserve leaving its fed funds rate unchanged when it meets next month.
Financial futures markets are predicting there is an 86% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 14% probability of a 25 basis point increase.
The Federal Open Market Committee’s 25 basis point increase in its fed funds rate on July 26 is probably the last one in this cycle.
STOCK INDEX FUTURES
Stock index futures are higher in advance of the July consumer price index report tomorrow and the July producer price index report on Friday. Both reports are expected to show a 0.2% increase on a month-to-month basis.
Mortgage applications in the week ended August 4 fell 3.1% after a 3.0% decline in the previous week.
Stock index futures prices are likely to trend higher today from current levels.
The U.S. dollar index is steady.
The Japanese yen is lower on news that Japan’s machine tool orders shrank 19.8% year-on-year in July 2023, moderating from an upwardly revised 22.2% decline in June.
The Canadian dollar and the Australian dollar are lower despite recent gains in crude oil prices.
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