This holiday-shortened week will continue to be dominated by coronavirus news. That one issue will drive trading more than any single economic release or Fed speak. That being said, the FOMC minutes from the January meeting will be released tomorrow but the fact the meeting took place before  the seriousness of the virus was appreciated will dull some of the discussion around the economic outlook.  We will, however, have a bevy of Fed speakers this week to provide an updated view,  but they are likely to echo the Chair’s refrain from last week that they will wait to see the impact start to flow through the numbers before moving away from the patient pause stance.  Another notable report this week will be the January Leading Index on Thursday, and while December’s release was disappointing and recession-signaling at–0.3%, the January report is expected to rebound to 0.4%. Existing home sales, housing starts and permits for January are all due this week and expected to reflect a housing market that continues to generate solid, if unspectacular, activity.

Treasury Curve Today Week Change
3 Month 1.57% +0.02%
6 Month 1.55% -0.01%
1 Year 1.47% +0.01%
2 Year 1.41% +0.03%
3 Year 1.38% +0.02%
5 Year 1.39% +0.01%
10 Year 1.56% +0.01%
30 Year 2.01% -0.01%
Short-Term Rates
Fed Funds 1.75%
Prime Rate 4.75%
3 Mo LIBOR 1.69%
6 Mo LIBOR 1.71%
12 Mo LIBOR 1.80%
Swap Rates
3 Year 1.392%
5 Year 1.386%
10 Year 1.504%
Economic Calendar
Date Statistic For Briefing Forecast Market Expects Prior
Feb 18 Empire Manufacturing Feb 5.0 12.9 actual 4.8
Feb 19 Housing Starts Jan -12.9% -11.7% 16.9%
Feb 19 Building Permits Jan 2.1% 2.1% -3.7%
Feb 19 PPI MoM Jan 0.1% 0.1% 0.2%
Feb 19 FOMC Minutes Jan 29 NA NA NA
Feb 20 Leading Index Jan 0.4% 0.4% -0.3%
Feb 21 Markit US Composite PMI Feb P 53.3 53.3 53.3
Feb 21 Existing Home Sales Jan 5.48m 5.45m 5.54m
Feb 21 Existing Home Sales MoM Jan -1.2% -1.7% 3.6%

calendar icon Top 5 Events for the Week

February 18-21, 2020

1. Fed Speak and FOMC Minutes – Wednesday
2. Coronavirus Developments – All Week
3. January Leading Index – Thursday
4. January Existing Home Sales – Friday
5. January Housing Starts & Permits – Tuesday


1.  FOMC Minutes and Fed Speak – Wednesday/All Week

FOMC minutes from the January 29 meeting will be released tomorrow and that will certainly be a highlight but there will be other Fed speak during much of the holiday-shortened week to keep the market entertained. One big qualifier to the  minutes is that much of the impact of the coronavirus was yet to be appreciated by investors so while officials were probably expressing positive outlooks on the economy, that may be subject to change given the ongoing impact of the virus.  Some of this week’s Fed speak could provide some updated views.


2.  Coronavirus Developments – All Week

The coronavirus developments will continue to drive trading more than any single economic release.  While various businesses have continued to adjust operations the other  issue is that supply chains based in China will start to impact other ancillary businesses as well. Car manufacturers are already reporting parts shortages that will only increase in the coming weeks. Thus, the negative impacts from shuttered Chinese factories will start to reverberate across the globe as just-in-time inventory systems start to suffer under the China-based shutdowns.


3.  January Leading Index – Thursday

The Conference Board’s Leading Indicators Index is a compilation of metrics that tend to foretell economic direction, and it is particularly useful as a predictor of recessions (see graph below). The index always falls well below zero prior to a recession and earlier in the year the index was flirting with the zero-level and printed a –0.3 in June. The index, however, rebounded later in the summer and would need to move below -1.0 to provide a reliable recession signal. That being said, the January number is expected to rebound to 0.4% versus December’s -0.3%. If the index matches expectations it will be a signal that while the economy continues to flirt with early-stage recession signals it manages to rebound in the nick of time.


Leading Index & Recessions


4.  January Existing Home Sales – Friday

Existing home sales constitute 90% of housing activity and as such the report represents the lion share of housing activity and represents the broadest measure of housing activity. For the month, sales are expected down -1.7% to 5.45 million (annualized) versus 5.54 million in December which was the highest since March 2018. The average over the past year has been 5.34 million so a beat on both the  annual average and a slight sequential decline after a huge month points to positive momentum in the sector.

5.  January Housing Starts & Permits – Tuesday

After a blowout December, January housing starts are expected to decrease -11.7% (1.42 million annualized) versus a whopping 16.9% gain in December as favorable weather allowed starts to reach a 13-year high.  Building permits are expected to increase 2.1% (1.450 million annualized) versus a –3.7% drop in December.  The average in starts over the past year has been 1.30 million and permits 1.35 million. Thus, both January readings are expected to exceed annual averages indicating continued momentum in the sector.



bar graph icon  Yield/Duration Opportunities

Yield/Duration Relationship

Tags: Published: 02/18/20 by Thomas R. Fitzgerald