When Doves Fly
Prior Week Summary
After several weeks of gains, U.S. equity markets moved broadly lower last week, primarily driven by global growth concerns, a weak jobs report and a policy reversal from the ECB. The jobs report fell far below consensus estimates, as the U.S. economy added a meager 20,000 jobs in February. The jobs data offered a few bright spots, however, as the unemployment rate edged down to 3.8%, and average hourly earnings advanced 3.4% year-over-year. In other economic news, new home sales and housing starts topped analyst estimates, but updated figures on construction spending and the trade balance fell below consensus estimates.
In a shift of policy, the ECB announced plans to aid a slowing European economy via a new stimulus package saying, "A new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021, each with a maturity of two years.” Additionally, the ECB signaled that interest rates are on hold through the rest of the year, months longer than originally anticipated. The policy reversal comes only one day after the Organization for Economic Cooperation and Development cut 2019 growth forecasts for the Eurozone to 1%, down from a previous estimate of 1.8%.
The Look Forward
In a busy week for economic releases, market participants will be looking forward to updated figures on CPI, PPI, retail sales and the Empire Manufacturing Survey, among others. Additionally, $38 billion of 3-year Treasury Notes, $24 billion of 10-year Treasury Notes and $16 billion of 30-year Treasury Bonds are going to auction.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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