JP Morgan Chase posted a 23% increase in quarterly profits; the first of the major banks to report third quarter results. U.S. equity markets are sharply higher on this positive news, while treasury prices are worsening.
The Fed minutes from September’s FOMC meeting showed a Fed divided over additional easing, but generally leaning in the direction of further action. The bond market has priced in another round of quantitative easing from the Fed, so any delay or additional dissent will cause interest rates to creep higher, as we saw Tuesday afternoon.
Finally, yesterday’s 3-year note auction left a bit to be desired as the indirect bid dropped to its lowest level in 2007. The indirect bid reflects foreign interest in the issue and could be problematic if demand weakens. Treasury will auction 10-year notes today and a repeat of yesterday’s weak auction could spook fixed income investors again.
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