Equities were mixed on trade and earnings.  Treasuries sold off as yields are now at their highest levels since September.  Oil rose for the third consecutive day.

Commenting about Treasury yields, the 10-year yield is now up about 45 basis points from its early September lows.  Yields have increased about 31%.  The 10-year yield however is still about 1.33% lower in yield than its high yield achieved last November.

According to Bloomberg, if  yields were to increase to this level, the 10-year would have a total negative annual return of 19.61% from current levels and a total negative return of 27% from its early September low yield..

Wow!  The catalyst for the selloff is stronger than expected economic activity.

Speaking of which last year at this juncture consensus was expecting a 2.3% GDP, unemployment would drop to 3.5%, PCE prices would increase to 1.9% and the Fed would increase interest rates by 50 -75 basis points in 2019.

The above forecast has largely unfolded for the exception that interest rates were lowered by 75 basis points.

Changing topics and as stated above, oil again advanced from a combination of stronger than expected demand and lower than expected supplies.  Another marquee fracker warned that US supplies may not increase by the forecasted amount and supplies may actually contract in 2020.  The reason for the shortfall…lack of funds and exhaustion of easily found supplies.

According to Blomberg, oil (WTI) has averaged about $56.67 for the year.  Yesterday WTI closed at $57.29.

In my view, rarely has there been such a divergence between reality and the price of the commodity.  Based upon current and expected conditions, both the Ten year Treasury yields and oil prices should be considerably higher.

Last night the foreign markets were up.  London was up 0.02%,  Paris up 0.28%, and Frankfurt up 0.15%.  China was down 0.43%,  Japan up 0.22%  and Hang Sang up 0.02%.

The Dow should open flat.  The 10-year is up 3/32 to yield 1.88%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.