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Yields Edge Lower on Geopolitical Uncertainty

The bond market ended an up-and-down week with yields slightly lower, as the geopolitical uncertainty which triggered the volatility has not remained isolated to Turkey.  Over the past four months, Turkey and Argentina's currencies have  declined by more than 30%, while South Africa and Brazil's currencies have declined by 15-20%.  While each economy's issues are unique and unlikely to directly affect the U.S. economy, they have led to a stronger demand for the safe haven of U.S. Treasuries. 

The week's economic indicators were mixed.  On the positive side, July's retail sales rose more than expected while the labor market remained strong as levels of ongoing jobless claims continue to plumb multi-decade lows.  The housing market was not as strong, as housing starts and mortgage applications were weak despite an increase in building permit issuance.  However, the weakness may be attributable to California wildfires as the West region showed a significant decline in starts.

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