Interest Rate Futures Gain on Possible DB Demise

September 30, 2016 5:08AM CDT

Banking problems in the euro zone is sending many commodities futures market participants to flight-to quality-buying in interest rate futures markets, pushing 30-year bond futures prices slightly higher at the end of the month.

The March contract in 30-year bond futures was up .30 percent at 168-23. News that Deutsche Bank may be failing and the German government does not plan to execute a bailout sent investors to safety sectors. Commodities futures markets analysts say the bank’s possible demise will have global impact, as Deutsche Bank is considered a power house in the banking industry, and likened it to the collapse of Lehman Brothers from 2008.

Friday brought a roster of notable reports to the commodities futures markets. U.S. consumer spending in August fell 0.1 percent last month after accounting for inflation, according to the U.S. Department of Commerce, compared by economists’ expectations of a 0.1 percent gain. The drop comes as wages and salary gains weakened, following four strong months of gains.

Some analysts believe the report will deter the U.S. Federal Reserve from raising interest rates. In remarks closely-watched by commodities futures markets participants last week, Fed Chair Janet Yellen said she expected the U.S. central bank would raise rates at least once this year to keep the economy stable. The probability that the Fed will hike interest rates at the November 2 meeting is 8 percent, compared to 10 percent on Thursday.

Personal incomes rose 0.2 percent last month, in line with expectations but just half of July’s gains. Consumer prices, excluding food and energy, rose 0.2 percent from the July report.

Meanwhile, the core PCE price index rose 0.2 percent in August, matching expectations and compared to July’s 0.3 percent growth, according to the U.S. Commerce Department. The Chicago Producers Price Index read 54.2 in September, up from 51.5 in August, and more than analysts' forecast for 52, according to the Institute of Supply Management and MNI Indicators

The final reading of the University of Michigan's consumer sentiment index rose to 91.2 in September, up from 89.8 in August. Analysts attribute the upswing to improving sentiment among households making $75,000 per year or more.

Dallas Fed President Robert Kaplan will speak at 12:00 EST.

30yr Daily

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