Deal or No Deal
Prior Week Summary
Worries of an intensifying trade war between the U.S. and China, and fears of another U.S. government shutdown led U.S. equity markets lower last week, ending a month-long rally that propelled global equity markets higher to begin the year. President Trump indicated Thursday that a meeting with the Chinese President Xi was “unlikely” to happen before the three-month trade truce ends at the end of this month. The U.S. is set to levy a 25% tariff on $200 billion of Chinese goods beginning March 1, 2019, up from the 10% tariff that was in effect prior to the trade truce.
President Trump and Congress have yet to agree to a deal that will fund the government beyond February 15th, intensifying fears that the U.S. government will slip into yet another shutdown. Market participants were energized late in the week, however, after reports indicated that Congressional leaders were expected to hold discussions through the weekend and hope to reach an agreement as early as Monday.
While light, economic data was largely negative last week with figures for the ISM Non-Manufacturing index, factory orders and durable goods orders all falling below consensus estimates.
The Look Forward
Aside from developments in Washington, market participants will be awaiting updated inflation data and retail sales numbers. Additionally, $45 billion in 3-month Treasury Bills and $39 billion in 6-month Treasury Bills are headed to auction.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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