The Market at 08:21AM ET
10-Year: -01/32…1.932…
EUR/USD: 1.2917…
USD/JPY: 103.10…

Moving the Market

MBA Mortgage Index: Actual -9.8%. prior -7.3%

Existing Home Sales (10): Briefing 5.05M, consensus 4.98M, prior 4.92M

FOMC Minutes (14)

Fed Chairman Bernanke will testify before the Joint Economic Committee (10)

08:21AM ET

European Yields: Yields across Europe hold little changed with slight outperformance in UK Gilts following the release of the latest Bank of England Monetary Policy Committee minutes and disappointing data. Meanwhile, yields across the Eurozone hold little changed following the larger than expected current account surplus (EUR25.9 bln actual v. EUR14.2 bln expected, EUR14.6 bln previous). 

• UK Gilt yields are off 2 bps in the belly of the curve after the latest MPC minutes showed Governor Mervyn King and two constituents were outvoted in their effort to increase the BOE's asset purchase program by GBP25 bln. Today's disappointing data is driving action as retail sales (-1.3% MoM actual v. 0.0% MoM expected), public sector net borrowing (GBP8.0 bln actual v. GBP7.6 bln expected), and CBI Industrial Order Expectations (-20 actual v. -18 expected) all fell short of estimates. A 2 bp decline has the 10-yr Gilt yield down to 1.885%.
• German Bund yields are little changed following today's solid 10-yr auction. The auction raised EUR4.1 bln while drawing 1.41% and a 1.60x bid/cover. The 10-yr Bund yield is unchanged at 1.376%.
• A flat session in Spanish Bonos has the benchmark 10-yr yield holding at 4.195%.
• Light buying of Italian BTPs has yields off roughly 1 bp apiece. The small bid has pushed the 10-yr yield down to 3.885%.

07:29AM ET

Dollar Holds Steady: The Dollar Index has spent the entire overnight session in negative territory, and now holds small flat near 83.85. The greenback saw little reaction to a Bloomberg interview with NY Fed President Bill Dudley, in which he suggested it will take three to four months for the Fed to decide whether or not it will taper its QE program. 

• EURUSD is +25 pips at 1.2930 as trade ticks higher for a third session. Action saw a muted response to the larger than expected Eurozone current account surplus (EUR25.9 bln actual v. EUR14.2 bln expected, EUR14.6 bln previous), but did tick to session highs near 1.2950 following the solid German 10-yr auction. The 1.3000 area will provide near-term resistance as both the 50- and 200-day moving averages aid the level.
• GBPUSD is -65 pips at 1.5085 as trade slides to a fresh one and a half month low after the latest Monetary Policy Committee minutes showed the Bank of England remains divided over whether or not more stimulus is needed. Governor Mervyn King and two other constituents were in favor of upping the asset purchase scheme by GBP25 bln, but were outvoted by the remaining members. The headlines crossed as today's data was rather weak with retail sales (-1.3% MoM actual v. 0.0% MoM expected), public sector net borrowing (GBP8.0 bln actual v. GBP7.6 bln expected), and CBI Industrial Order Expectations (-20 actual v. -18 expected) all falling short of estimates. Current levels should provide at least some near-term support while a breakdown sets up a test of the 1.4900 area, which represents the lowest since June 2010.
• USDCHF is +40 pips at .9745 as trade tests nine-month highs following comments from Swiss National Bank Chairman Thomas Jordan. Mr. Jordan, speaking in Frankfurt, suggested the central bank has not ruled out adjusting its EURCHF1.20 floor, and that negative interest rates are still a possibility. Meanwhile, EURCHF is +75 pips at 1.2595 as it trades at its best level in two years.
• USDJPY is +45 pips at 102.95 as trade pressures the best levels since October 2008. Today's bid comes after the Bank of Japan noted the 'economy has started to pick up.' Other comments suggested the central bank has been monitoring JGB yields carefully, and will act accordingly. The 10-yr JGB yield ticked above 90 bps on the news before slipping back to 89 bps. Meanwhile, data out overnight showed Japan's trade deficit narrowed to JPY0.76 trln (JPY0.63 trln expected, JPY0.92 trln previous).
• AUDUSD is -50 pips at .9750 as trade slips back onto the recent lows following the disappointing Westpac Consumer Sentiment (-7.0%). The .9600/.9700 area remains key as action holds near its worst level in a year. USDCNY fell to 6.1313.
• USDCAD is +40 pips at 1.0310 as trade looks to break above the trendline off the November 2011 high. Traders will be monitoring action closely upon the release of this morning's Canadian retail sales data.

06:54AM ET
Treasuries Tick Higher in Early Trade: Treasuries hold little changed following an uneventful overnight session that saw action hug the flat line. Headlines crossing early this morning come from a Bloomberg interview of NY Fed President Bill Dudley, in which he suggested the decision to taper the Fed's QE program will take three to four months. Maturities across most of the complex are up just a couple of ticks as they look to put together a second day of advances. The early bid has longer dated yields off close to 2 bps with the 10-yr pushing lower by 2 bps to 1.923% after yesterday's selling had it within an eyelash of 2.000%. Curve flattening persists with the 2-10-yr spread narrowing to 168.5 bps. Elsewhere, precious metals are firm with gold up $9 at $1386 and silver higher by $0.15 near $22.60. Today will see the weekly MBA Mortgage Index (7), existing home sales (10), and the FOMC minutes (14) cross the wires. Fed Chairman Ben Bernanke will discuss the economy in front of the congressional Joint Economic Committee (10).

03:37PM ET
Treasuries See Modest Gains: Treasuries ended with modest gains as a late morning bid ran the complex back into positive territory before buyers remained in control for the remainder of the session. The complex was tracking higher in early action, but saw some decent sized selling as equity markets rallied off their opening lows. The 10-yr yield came within a whisker of 2.000%, but was unable to cross the psychologically important level as buyers stepped up to defend the level. As data remained absent, action was dictated by comments from St. Louis Fed President Bullard and New York Fed President Dudley, both of which made their dovish stances know. Mr. Bullard suggested negative rates were possible, although, there is not enough support at this time; while Mr. Dudley reiterated the Fed could adjust the size of its purchases up or down based on changes in the labor market and inflation. Traders took the words from both as a sign the Fed is not yet ready to begin tapering its program. The 10-yr yield ended the day down 2 bps at 1.944%, avoiding its highest close in two months. The buying flattened the yield curve, narrowing the 2-10-yr spread to 170 bps. Elsewhere, precious metals lost ground with gold falling $9 to $1375 and silver shedding $0.20 to near $22.35. Wednesday will see the weekly MBA Mortgage Index (7), existing home sales (10), and the FOMC minutes (14) cross the wires. Fed Chairman Ben Bernanke will discuss the economy in front of the congressional Joint Economic Committee (10).

02:36PM ET

Dollar Slips Back Below 84.00: The Dollar Index saw early buying produce a test of the 84.20 area, but trade slipped back below the 84.00 mark following dovish rhetoric from St. Louis Fed President James Bullard. Mr. Bullard suggested the Fed could take rates negative, but there is not enough support at this time. The Index briefly slipped into negative territory, touching 83.65 before buyers emerged. 

• EURUSD is +15 pips at 1.2900 as trade looks for its best close in a week. Late morning strength provided a test of the 1.2950 area, but sellers managed to push the pair off its best levels. Near-term resistance comes into play near 1.3000 and is aided by both the 50- and 200-day moving averages while support rests at 1.2800. EU leaders will gather in Brussels for yet another summit. Eurozone data is limited to the current account balance.
• GBPUSD is -105 pips at 1.5150 as action remains on track for its lowest close in one and a half months. Sellers have been in control since this morning's data showed a letup in pricing pressures, causing many to believe the Bank of England will expand its asset purchase program once the transition of power at the central bank takes place in June. The 1.5100 area will provide short-term support, but the 1.4900 region remains far more important. Britain's retail sales, public sector net borrowing, and CBI Industrial Order Expectations will accompany the Monetary Policy Committee minutes.
• USDCHF is +35 pips at .9700 as trade continues to hold near nine-month highs. Any pullback onto the .9500 level will be monitored closely as key support rests in the vicinity. Swiss National Bank Chairman Thomas Jordan will speak in Frankfurt.
• USDJPY is +30 pips at 102.55 as trade reverses roughly half of yesterday's losses. The pair found support near 102.00 early in the session after Japanese Economy Minister Akira Amari backtracked from yesterday's statement. Mr. Amari suggested, 'I have previously said that the overly strong yen is in the process of being corrected. I will not say it has been corrected, or where it will finish.' The Bank of Japan policy decision will be announced tonight along with the trade balance.
• AUDUSD is +5 pips at .9810 and remains on track to post a second day of gains following its 10-day losing streak. While the hard currency will likely to see further selling pressure as the Reserve Bank of Australia continues to cut rates, a near-term bounce is probable as conditions are heavily oversold. The 1.0200 area is the first level of any real resistance. Australia's Westpac Consumer Sentiment is due out this evening.
• USDCAD is +25 pips at 1.0265 after early buying saw the pair touch 1.0320. The 1.0300 area will be in focus over the coming days, with a close above 1.0320 marking the best in 11 months. Canadian data includes retail sales and core retail sales.