U.S. Home Sales Lowest Since 2015
U.S. Existing-Home Sales fell in September to the slowest pace in almost three years, possibly signaling that rising prices and mortgage costs are turning away potential buyers. The data was released by the National Association of Realtors.
-The median sales price rose 4.2% YoY to $258,100
-The inventory of available properties rose 1.1% YoY to 1.88m
-Contract closings fell from the previous period to an annual rate of 5.15m, the lowest level since November of 2015.
Yield-fueled Drop Continues
U.S. stocks continued trading lower Monday, as traders keep their eyes on rapidly rising interest rates, and corporate earnings from some of the biggest banks and financial institutions this week. Higher yields means steeper borrowing costs for companies and investors alike, and has cause for reassessing equity valuations, which were already seeming lofty to many investors as-is. Better rates for ‘risk-free’ bonds has the potential to compete against equities, which are much riskier by comparison. However, rising rates do come against a backdrop of an improving domestic economy, with the U.S. unemployment rate reaching its lowest level since 1969 among a number of other metrics in the previous weeks that have strengthened the notion that the U.S. economic recovery and expansion has continued.
Stocks Drop as Bond Yields Jump
U.S. stocks are trading lower Thursday as bond yields rise. The yield on the 10-year U.S. Treasury note rose 4.4 basis points to 3.20%, touching its highest level since 2011. This also comes just a day after its biggest one-session increase since November of 2016. Traders may be dumping bonds after economic reports indicate continued strength in the U.S. economy. Higher yields have the potential to dampen enthusiasm for stocks, as it can offer reliable income without the risk or volatility that commonly comes with equities. Initial jobless claims fell by 8,000 in the latest period and are coming near multidecade lows. The report came just after yesterday’s strong private-sector employment number, and a day before the September jobs report.
In other markets, crude oil prices have sold off sharply from a four-year-high reached yesterday, while gold & the U.S. Dollar have remained relatively unchanged.
New CME Products
CME Group has announced that they will offer a new WTI Houston Crude Oil futures contract, with three physical delivery locations on the Enterprise Houston system, pending regulatory review. WTI Houston Crude Oil futures will be listed with and subject to the rules of NYMEX, starting with the January 2019 contract month. The new contract expands CME’s already large suite of crude oil futures and options and will complement the global benchmark NYMEX WTI Light Sweet Crude Oil futures.
“Houston’s importance as a trading and export hub for physical crude oil from Cushing and the Permian Basin continues to evolve due to the shale oil revolution and repeal of the crude oil export ban,” says Peter Keavey, CME Group’s Global Head of Energy. “The WTI Houston contract offer commercial customers and physical traders a way to hedge their physical price risk, enhances the transparency of U.S. crude oil prices on the water in Houston and reinforces the strength of our global benchmark WTI Cushing contract. We believe the network of domestic users and location close to export facilities will ensure this contract provides transparent price discovery and risk transfer in the growing Houston region.”
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CME Group’s Volume Increases
CME Group, the world’s largest derivatives exchange, posted an average daily volume of 15.9 million contracts in August 2018, up 18% from the prior month. Open interest increased by 13% since year-end 2017. See below for some highlights of volume increases vs. August of 2017.
Interest Rate Volume:
-Averaged 8.6 million contracts per day in August, up 11% from August 2017.
-U.S. Treasury futures & options ADV grew 18%
-Eurodollar options ADV increased 4%
-Ultra U.S. Treasury Bond futures & options ADV rose 31%
-Ultra 10-Year U.S. Treasury Note futures & options ADV increased 44%
-Fed Fund futures ADV rose 18%
-British Pound futures & options ADV increased by 11%
-Australian dollar futures & options ADV grew 17%
-Mexican Peso futures & options ADV increased 65%
-Wheat futures & options ADV rose 28%
-Livestock futures ADV grew 15%
-Lean Hog futures & options ADV increased by 31%
-Copper futures & options ADV rose 16%
-Gold options ADV grew 29%
Equity Index Volume:
-E-mini NASDAQ 100 futures ADV grew 1%
-E-mini Dow futures & options increased 5%
-E-mini S&P 500 Wednesday Weekly futures & options ADV increased 7%
-E-mini S&P 500 Monday Weekly futures & options rose 11%