Written Commentary
INTEREST RATE MARKET FUTURES
Futures are higher at the front end of the yield curve but are lower at the long end of the yield curve.
The 30-year U.S. Treasury bond futures declined to the lowest level since July 5.
Patrick Harker of the Federal Reserve will speak at 9:00 central time.
Currently there is an 88% probability that the FOMC will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is a 12% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
Futures at the front end of the yield curve will probably hold up better than futures at the long end of the yield curve.
CURRENCY FUTURES
The U.S. dollar index has been supported by increasing U.S. Treasury yields. In addition, a flight to safety flow of funds in light of rising tensions in the Middle East is bolstering the greenback.
The fundamentals and technicals remain supportive to the U.S. dollar.
The Japanese yen depreciated toward 151 per U.S. dollar on Tuesday, hitting its lowest level in nearly three months and breaching the key 150 per U.S. dollar mark that traders fear could prompt another round of currency intervention from Japanese monetary authorities.
However, Japan’s Deputy Chief Cabinet Secretary Aoki declined to comment on currency moves, which is in contrast to currency diplomat Atsushi Mimura who reiterated last week that they are closely monitoring foreign exchange moves and that excess volatility is undesirable.
STOCK INDEX FUTURES
Stock index futures are lower due to rising geopolitical tensions in the Middle East, in conjunction with increasing U.S. Treasury yields.
In addition, some of the pressure may be linked to the belief that the Federal Reserve will not cut interest rates as quickly as recently anticipated.
The 9:00 central time October Richmond Federal Reserve manufacturing index is expected to be -16.5.
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