The Week in Review/Week AheadThe Week in Review
Analyst: Jonathan Garber
The Week Ahead
- Treasuries finished the week mixed as selling took place up front while buyers were in control of longer dated maturities.
- A quiet economic calender saw mixed results as existing home sales (5.04 mln actual v. 5.00 mln expected) and durable orders (0.7% actual v. 0.3% expected) beat and new home sales (406K actual v. 475K expected) missed.
- CPI posted an in-line 0.3% print.
- Treasury held an in-line $15 bln 10y TIPs auction. The auction drew 0.249% and a 2.49x bid/cover. Indirect bidders took down 53.1% of the supply while direct bidders bought 10.3%.
- Buying at the long end dropped the 30y -4bps to 3.244%. The yield ended the week at its lowest level in 13 months as action now tests support in the 3.200%3.250% area.
- The 10y shed -1bps to 2.469% as trade settled near its lowest levels since the end of May. Traders will have their eye on the 2.440% level into next week as a flush below there would produce the lowest close since June 2013, and put 2.200%/2.250% support on the radar.
- In the belly, the 5y tacked on +3bps to 1.676%. Action tested support in the 1.650% area that is guarded by the 50 and 100 dma early in the week, but was unable to penetrate the level.
- Up front, the 2y climbed +4bps to 0.484%. The 0.500% region will be in focus in the days ahead as a punch through there puts the September 2013 highs in play.
- A flatter curve won out as the 2-10-yr spread tightened to 198.5bps and the 5-30-yr spread narrowed to 157bps.
- Monday's data is limited to pending home sales (10). Treasury will auction $29 bln 2y notes.
- Tuesday will see Case-Shiller 20-city Index (9) and consumer confidence (10). Treasury will hold a $35 bln 5y note auction.
- Data picks up on Wednesday with the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), GDP-Adv. (8:30), and the FOMC rate decision (14). Treasury will auction $29 bln 7y notes.
- Data continues to flow on Thursday with Challenger Job Cuts (7:30), initial and continuing claims, Employment Cost Index (8:30), and Chicago PMI (9:45).
- Friday's data is the most anticipated of the week as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, personal income and spending, PCE prices- core (8:30), Michigan Sentiment - Final (9:55), ISM Index, construction spending (10), auto/truck sales (14) are due out.