OnTheRadar: Mkt Attempts To Shrug Risk Jitters; US Ylds Steady

--Russell 2000 Posts New Record High

By Vicki Schmelzer

     NEW YORK (MNI) - Global investors attempted to shrug off risk jitters

Tuesday, but remained unwilling to aggressively position given so much U.S.

geopolitical uncertainty.

     U.S. Treasury yields struggled to push higher on the day, while U.S. stocks

took comfort from Fed Chair Janet Yellen, who repeated that uncertainty about

sluggish inflation "strengthens the case for a gradual pace of adjustments." See

MNI Main Wire story at 12:51 p.m. ET. 

     Ten-year U.S. Treasury yields were last near 2.236%, after trading in a

2.214% to 2.245% range. 

     The Sept. 20 yield high of 2.287% was the highest since August 8, when

yields peaked near 2.289%. Ten-year yields last closed above 2.30% on July 27. 

     The Sept. 8 yield low near 2.016% was the lowest since Nov. 10, when yields

saw a wide range of 1.991% to 2.145% two-days after the U.S. election. 

     After a larger yield sell-off in June, U.S. yields subsequently recovered,

and 10-year yields rose to 2.396% July 7, the highest since mid-May. 

     As background, U.S. Treasury yields posted highs near 2.421% on May 11,

which was the highest yield since March 31, when the 10-year yield peaked at

2.431%. 

     On March 14, ahead of the Fed decision, 10-year U.S. yields topped out at

2.628%.

     As a reminder, 10-year U.S. yields rallied from lows near 1.720% Nov. 9,

the day after the U.S. election, to highs near 2.639% on Dec. 15, 2016, which

was the highest since the Sept. 19, 2014, peak near 2.655%.

     Ten-year German Bund yields closed near 0.408% Tuesday, after trading in a

0.397% to 0.419% range. The Sept. 21 yield high of 0.484% was the highest since

August 7, when Bund yields peaked near 0.491%. 

     The low of 0.292%, seen Sept. 8, was the lowest Bund yield since June 27,

when yields troughed at 0.238%. The June 14 low of 0.225% was the lowest since

April 20, when yields bottomed at 0.192%.

     The July 12 yield high of 0.619% was the highest since Jan. 4, 2016, when

Bund yields peaked at 0.627%, the 2016 high. The next level of resistance would

be 0.651%, the Dec. 30, 2015 high. 

     As background, Bund yields fell to a low near -0.161% Sept. 27, 2016,

versus the life-time low around -0.2059% seen July 6, 2016.

     Ten-year Japanese government bond yields closed around 0.034%. When U.S.

and other global yields were at recent lows earlier in September, JGB yields

flirted with negative territory and tested the lowest yields since mid November.

     JGB yields hit highs near 0.108% July 7, which prompted the Bank of Japan

to step in buying bonds, offering to buy 10-year JGBs in unlimited amounts at

0.11%. 

     Current low JGB yields compared to the Feb. 3 highs near 0.150%, which were

the highest since the BOJ introduced negative interest rate policy back on Jan.

29, 2016. 

     Ten-year UK Gilt yields closed around 1.330%, after trading in a 1.313% to

1.354% range.  

     The Sept. 8 low of 0.951% was the lowest since June 15, when yields tested

lows near 0.938% and the Sept. 21 high of 1.392% was the highest since Feb. 3,

when UK yields hit 1.420%.

     The June 14 low of 0.923% was the lowest since Oct. 7, when Gilt yields

bottomed near 0.905%.

     On Jan. 26, 2017, 10-year UK yields saw highs near 1.530%, which was the

highest yield since Dec. 15, when yields hit 1.536%, the highest since May 5,

2016, when Gilt yields saw a high near 1.538%.

     In currencies, the euro held near $1.1786 late Tuesday, on the low side of

a $1.1758 to $1.1862 range. 

     Earlier, the pair took out initial supports in the form of the Sept. 14

lows near $1.1838, and the August 31 lows near $1.1823, and then the 55-day

moving average, at $1.1799. 

     The pair has been above that mark since mid August and a decisive break

will target the August 17 lows near $1.1662.

     The Sept. 8 high of $1.2092, seen at the peak of dollar selling, was the

highest euro level since Jan. 2, 2015, when the pair topped out at $1.2108. The

2015 high was $1.2109, seen Jan. 1. 

     In other pairs, dollar-yen held near Y112.27, in the middle of a Y111.50 to

Y112.48 range. The Sept. 21 high of Y112.72 was the highest since July 17, when

the pair peaked near Y112.87, which will be the next topside hurdle. 

     The pair struggled to get back above its 200-day moving average, currently

at Y112.21. 

     In commodities, spot gold held near $1,295.75 per ounce, after trading in a

$1,293.60 to $1,313.74 range. 

     Gold bottomed at $1,288.20 Sept. 21 and stalled ahead of the 55-day moving

average, currently around $1,287. The precious metal has been above its 55-day

moving average since late July. 

     A decisive break of $1,290 will target the August 25 lows near $1,276.36. 

     The $1,357.61 gold high, seen Sept. 8 at the peak of U.S. dollar sales and

risk aversion, was the highest since August 16, 2016, when the precious metal

peaked at $1,358.21. 

     NYMEX November light sweet crude oil futures settled down $0.34 at $51.88

per barrel, after trading in a $51.43 to $52.43 range. The earlier high was the

highest level since mid April, with prices underpinned by supply concerns. 

     West Texas Intermediate's decisive close above $52.00 (May 25 high) on

Monday had some eyeing a move to $52.65, the April 19 high, and then ultimately,

$53.76, the April 12 high. 

     Crude oil peaked in late May ahead of the announcement of a nine-month

extension of the OPEC/non-OPEC production cuts. 

     This extension was largely priced in and crude prices fell to $42.05 on

June 21 before recovering. Rumors continued to swirl that OPEC may extend the

current agreement, set to expire in March 2018, until the end of next year. 

     The market awaited API crude inventory data, due out later Tuesday, and

then the more definitive EIA release Wednesday morning. 

     In U.S. stocks, the S&P 500 closed up 0.01% at 2,496.84, after trading in a

2,495.12 to 2,503.51 range. The index posted a record intraday high of 2,508.85

September 20 and saw a low of 2,488.03 Monday, which was a two week low. 

     At Tuesday's close, the S&P 500 was up 11.5% year-to-date. 

     Market players were also monitoring the Russell 2000 index, which often

leads larger stock swings.

     The Russell 2000 was last near 1,457, down from the new record high of

1,460.950 posted earlier.  

     Last month, the index bottomed at 1,349.354 on August 18, the lowest level

since April 17, when the Russell 2000 bottomed at 1,345.363. From last month's

low to Tuesday's high, the index was up 8.3%.

     On risk appetite, the CBOE's volatility index or VIX was last at 10.20, on

the low side of a 9.94 to 10.68 range. More recently, the VIX has traded in a

9.50, seen Sept. 22 to 11.25, seen Sept. 25 range and has held below its 200-day

moving average, currently at 11.45.

     The VIX high of 17.28, seen August 11, was the highest since Nov. 9, the

day after the U.S. election, when the VIX peaked at 21.48. The high for this

month has been 14.06, seen Sept. 5. 

     The July 26 low of 8.84 was a new life-time intraday VIX low (prior

life-time intraday low was 8.89, seen Dec. 27, 1993). 

     Looking ahead, August durable goods data is due out Wednesday, with MNI's

median estimate 0.8% for headline durables and 0.3% ex-transportation. 

     Soundbites related to North Korea, U.S. tax and healthcare reform could

also hold sway on markets. 

     --follow MNIEyeonFX on twitter.com --

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

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