Integral Aggregation

1. BOND REPORT: 10-year Treasury Yield Hits 2-month Lows Week's action marked by political uncertainty as President Donald Trump's administration sends mixed signals on debt ceiling talks Treasurys lured bidders on Friday, pushing yields lower, partly on what traders described as a relief rally after Federal Reserve Chairwoman Janet Yellen issued no remarks on the pace of the central bank's tightening cycle, read as slightly dovish sign. Overall, yields for U.S. government paper struggled for direction across the week as investors grappled with mixed messages from President Donald Trump's administration. On one hand Trump said he was willing to see a government shutdown (http://www.marketwatch.com/story/treasurys- catch-haven-bid-on-government-shutdown-fears-2017-08-23), but on the other hand, his lead economic adviser Gary Cohn, Treasury Secretary Steven Mnuchin and Sen. Majority Leader Mitch McConnell, R-Ky., all said they would raise the debt ceiling without problems. Since the outbreak of violence in Charlottesville, Va., speculation was rampant that Cohn would leave the White House. Cohn said he felt dutybound to help the administration "do better," in an interview with the Financial Times released on Friday (https://www.ft.com/content/0169006e-8946- 11e7-bf50-e1c239b45787). Cohn has been touted as the leading candidate to succeed Yellen (http://www.marketwatch.com/story/cohn-reportedly-front-runner-to-replace-yellen-as-fed-chief- 2017-07-11) when her current term ends in 2017 and he also is seen as an instrumental figure in helping Trump advance fiscal-stimulus pledges including tax cuts. Read:Do stock-market investors really care about Gary Cohn and the Trump agenda? (http://www.marketwatch.com/story/do-stock-market-investors-really-care-about-gary-cohn-and- the-trump-agenda-2017-08-22) On the day, the benchmark 10-year Treasury note's yield fell 2.4 basis points to 2.169%, its lowest level since June 26, and contributing to most of the weeklong decline of 2.6 basis points. Bond prices move inversely to yields. Likewise, the 30-year bond's yield declined 1.8 basis point to 2.750%, adding to a weeklong fall of 2.9 basis points. While, the yield for the 2-year note edged higher 0.4 basis point to 1.338%, extending the week's rise to 2.4 basis points, its largest five-day jump since July 7. See: Jackson Hole Fed conference live blog: Yellen defends bank-reform efforts (http://blogs.marketwatch.com/capitolreport/2017/08/25/jackson-hole-fed-conference-live-blog- yellen-draghi-on-tap/) Treasury yields fell,Integral aggregator meaning a rise in bond prices, on Friday after Yellen offered no thoughts on the current policy path as investors had expected. Analysts said those looking to

2. purchase government paper waited for Yellen's speech to finish, before plunging back into the market . "There was some pent-up demand for bonds, pent-up demand for euros. Whoever wanted to buy bonds was waiting for the all-clear, waiting for Yellen to say nothing," said Thierry Albert Wizman, global currencies and interest-rates strategist for the Macquarie Group. Some had initially suggested the speech could be sizing up to become a historic one, as it could be the last time she will attend the Jackson Hole symposium as arguably the world's most powerful central banker. Also see:Fearful of awakening market bears, Yellen and Draghi to tread softly at Jackson Hole (http://www.marketwatch.com/story/fearful-of-awakening-market-bears-yellen-and-draghi-to-tread- softly-at-jackson-hole-2017-08-24) But unlike the market's solid rally after Yellen's bland remarks, Treasurys didn't react after Draghi steered away from any mention of the future trajectory of ECB monetary policy (https://www.ecb.europa.eu/press/key/date/2017/html/ecb.sp170825.en.html) in his speech, perhaps to avoid giving any signs that could be read as a hawkish prelude to a tapering of its bond purchases. Although, he did indicate that global economy is firming, which may have jolted the 1% higher against the U.S. dollar, hitting its strongest level against greenback since January 2015 Integral aggregation(http://www.marketwatch.com/story/dollar-tilts-lower-as-markets-get-set-for- yellen-speech-2017-08-25). Last time round (http://www.marketwatch.com/story/what-happened-to-mario-draghis-silver- tongue-2017-06-28), his speech at Sintra two months back also caused the euro to surge, which can have a "disinflationary" impact and hamstring the central bank's efforts to stimulate a broad economic recovery across the eurozone, said Eric Lascelles, chief economist of RBC Global Asset Management. But as the ECB runs out of sovereign bonds to buy, analysts feel Draghi will have to begin signaling an end to the use of quantitative easing soon. The yield for the 10-year German government bond, or bund, was mostly flat at 0.375%. European debt markets were already closed before Draghi's speech.