Updated: 07-07-2015

The Market at 03:46PM ET
10-Year: +9/32…2.26…
EUR/USD: 1.1027…
USD/JPY: 122.57…

Moving the Market

-- Kathimerini reports that "16 of the other 18 countries in the eurozone are in favor of letting Greece leave the eurozone" according to sources in Brussels

-- May Trade Balance: Actual $41.9 bln, Briefing.com Consensus -$42.5 bln, Prior -$40.7 bln (revised from -40.9 bln)

-- May JOLTS - Job Openings: Actual 5.363M, Prior 5.334M (revised from 5.367M)

-- $24 bln 3-year note auction: High yield 0.932%, Bid-to-Cover 3.16, Indirect Bid 47.7%, Direct Bid 13.9%

03:46PM ET
Treasuries Advance Despite Optimism on Greece

  • Treasury coupon securities finished the session in positive territory despite equities reversing early losses to end green
  • Yield Check:
    • 2-yr: -2 bps to 0.57%
    • 5-yr: -2 bps to 1.54%
    • 10-yr: -3 bps to 2.26%
    • 30-yr: -4 bps to 3.04%
  • News:
    • The U.S. trade deficit widened less than expected to 41.9 bln in May from a downwardly revised $40.7 bln in April. The Briefing.com consensus estimate was -$42.5 bln
    • JOLTS rose to 5.363M in May from a downwardly revised 5.334M in April
    • The $24 billion 3-year note auction was met with soft demand:
      • High yield: 0.932%
      • Bid-to-cover: 3.16
      • Indirect bid: 47.7%
      • Direct bid: 13.9%
    • Greece is due to submit a proposal to the Eurogroup tomorrow
      • The package is said to include a short-term funding agreement and a longer-term package
      • According to Kathimerini, 16 out of 18 eurozone finance ministers do not want Greece in the bloc
  • Data out Wednesday:
    • MBA Mortgage Index for the week ending 7/4 (07:00 ET)
    • Crude Inventories for the week ending 7/4 (10:30 ET)
    • FOMC Minutes for the June 17th meeting (14:00 ET)
  • Treasury Auction:
    • $21 billion 10-year note auction (reopening) (results at 13:00 ET)
  • Fed Speaker:
    • San Francisco Fed President John Williams (FOMC voter) speaks on the economic outlook (14:00 ET)

10-Yr: +9/32… EUR/USD: 1.1027… USD/JPY: 122.57…

02:54PM ET
Dollar and Yen Rally 

  • The U.S. Dollar Index jumped 0.62% to 96.90 today after the euro (which makes up about 60% of the index) sold off on sharply lower European yields
    • Fears of Grexit have increased as the official creditors seem highly opposed to debt forgiveness for Greece
    • Greece owes the ECB 3.5 bln euro on July 20th
    • German Industrial Production was flat m/m in May versus expectations for growth and a 0.6% jump in April
  • GBP/USD: -1.00% to 1.5448
    • Manufacturing Production in the U.K. fell 0.6% m/m in May versus a 0.4% decline April. The report missed expectations and sent the 10-year Gilt yield down a quick 5 bps
  • USD/JPY: -0.22% to 122.36
  • USD/CHF: +0.55% to 0.9476
    • The Swiss unemployment rate for June matched expectations and the prior reading at 3.3%
  • USD/CAD: +0.70% to 1.2741
  • AUD/USD: -0.79% to 0.7430
    • The Reserve Bank of Australia held its cash rate steady at 2.00%
    • Governor Stevens said that the Aussie had more room to fall against a broad basket of currencies, despite its depreciation against the greenback
  • NZD/USD: -0.34% to 0.6651

10-Yr: +19/32… EUR/USD: 1.0978… USD/JPY: 122.41…

01:58PM ET
Equities Rip off of Lows

  • Treasuries are pulling back this afternoon as the emotional momentum swings in the other direction
    • Most of the eurozone finance ministers have rejected debt forgiveness out of hand and Alexis Tsipras is set to submit the Greek government's proposal to the Eurogroup tomorrow
    •  The S&P 500 is up 25 points from its low of 2043, and above its 200-day moving average of 2059, a level that it violated and held both today and yesterday
  • President Obama called German Chancellor Merkel today to discuss the crisis. Perhaps this development is adding to the wave of positive sentiment
  • Yield Check:
    • 2-yr: -3 bps to 0.57%
    • 5-yr: -5 bps to 1.51%
    • 10-yr: -7 bps to 2.22%
    • 30-yr: -7 bps to 3.01%

10-Yr: +17/32… EUR/USD: 1.0961… USD/JPY: 122.43…

01:25PM ET
Treasury Auction Results

  • The $24 bln 3-year note auction was met with tepid demand
    • Auction Results: 
      • High yield: 0.932%
      • Bid-to-cover: 3.16
      • Indirect bid: 47.7%
      • Direct bid:13.9%
    • Prior 12-auction average results:
      • High yield: 1.009%
      • Bid-to-cover: 3.28
      • Indirect bid: 43.5%
      • Direct bid: 13.1%

10-Yr: +18/32… EUR/USD: 1.0945… USD/JPY: 122.34…

12:33PM ET
Equities Bounce

  • The Treasury complex is holding onto strong gains heading into the $24 billion 3-year note auction
  • German Chancellor Angela Merkel and French President Hollande are currently meeting with Greek Prime Minister Alexis Tsipras
  • Lower Treasury yields are encouraging sellers of $/Yen today, with that pair falling 0.37% to 122.18
  • The 10-year and 30-year yields are sitting below their 50-day moving averages, the first time that has happened since the global debt sell-off began in late April
  • Yield Check:
    • 2-yr: -4 bps to 0.56%
    • 5-yr: -6 bps to 1.50%
    • 10-yr: -8 bps to 2.21%
    • 30-yr: -8 bps to 3.01%
  • 10-Year Yield (Daily)


  • 30-Year Yield (Daily)

10-Yr: +21/32… EUR/USD: 1.0954… USD/JPY: 122.18…

11:50AM ET
Treasury Auction Preview

  • The results of the $24 bln 3-year note auction will be released at 13:00 ET
    • The last 9 3-year note auctions have stopped through, indicating strong demand
    • Prior auction results:
      • High yield: 1.125%
      • Bid-to-cover: 3.33
      • Indirect bid: 50.7%
      • Direct bid: 9.7%
    • Prior 12-auction average results:
      • High yield: 1.009%
      • Bid-to-cover: 3.28
      • Indirect bid: 43.5%
      • Direct bid: 13.1%

10-Yr: +22/32… EUR/USD: 1.0948… USD/JPY: 122.14…

11:19AM ET
Markets Remain in Risk-off Posture

  • Treasuries are holding onto big gains for the day ahead of the $24 bln 3-year note auction. Equities are selling, the dollar and yen are rallying, and crude is falling sharply with the other commodities. Even gold is down 1.89% to $1,151/troy oz.
  • Eurogroup President Jeroen Dijsselbloem said that Greece will submit a new proposal on Wednesday and that the Eurogroup will have a conference call to discuss it
    • The Dutch prime minister is now saying that Greece is taking a big risk
      • Since Greece is already in depression and the rest of the eurozone is experiencing a sluggish recovery, Tsipras might say the same thing to his Dutch counterpart
      • The Eurostoxx 50 is down 1.49% to 3,308
      • Periphery/core spreads remain higher but stable
        • 10-yr Bono/Bund: +8 bps to 165 bps
        • The 10-yr Bund yield is at its lowest level since June 2nd, down 12 bps to 0.64%
  • Yield Check:
    • 2-yr: -4 bps to 0.56%
    • 5-yr: -7 bps to 1.48%
    • 10-yr: -9 bps to 2.20%
    • 30-yr: -9 bps to 2.99%

10-Yr: +25/32… EUR/USD: 1.0950… USD/JPY: 122.15…

11:08AM ET
DXY Hits Month Highs: The Dollar Index is marching higher as it crosses the 97 level. This marks a month high for the dollar. Some safe haven buying is at play here as markets are concerned with the extreme volatility in China and of course the Greek situation. This is leading investors into the greenback until we can find some clarity on key issues. On the economic data front, the trade balance deficit came in slightly lower than expected while the JOLTS- Job Openings number remained steady. The market will be awaiting tomorrow's FOMC Minutes (Wed 2pm) for some clues on the Fed's thoughts on Greece, China and the dollar.

  • The euro has tumbled to 1.0936 in early trade. The uncertainty for Greece continues to weigh on the single currency. There were talks of a deal being cut 48 hours following the referendum but they are showing to be an overly optimistic time line. Today the EU held a meeting to discuss the situation. Members were disappointed that Greece failed to come to the table with a new plan. There is talk that the Greeks will be presenting their outline tomorrow or Wednesday. So the market will remain in the dark.
  • The pound has been dragged lower as the European situation remains wobbly. The currency is now testing its 2300 sma (1.5417). The Manufacturing and Industrial Production numbers were mixed this morning and are providing little direction for cable. The Bank of England will be meeting on Thursday but there is little expectations in terms of a potential change to the asset purchase program or the rate.
  • The yen continues to trade in a steady range. Given the volatility and uncertainty it provides us some further evidence that the yen has lost some of its status as a safe haven currency. The yen was seeing some small buying interest following the early selling in the U.S. equity markets. But so far 122 is showing signs of holding support.

10-Yr: +27/32… EUR/USD: 1.0937… USD/JPY: 122.10…

10:17AM ET
Stocks Drop at Open

  • U.S. stocks declined sharply in their first half hour of trade as the U.S. Dollar Index rallied 0.78% to 97.06 and the Treasury complex extended its gains for the session
    • That move may be encouraging speculation by Treasury traders that the Fed will wait on hiking rates due to headwinds from the stronger dollar
      • The 2-yr yield is down to 0.55%, having touched its lowest yield since May 18th earlier in the session
  • 5's, 10's, and 30's have taken out several resistance levels in the last 2 trading sessions (charts to follow)
  • JOLTS rose to 5.363M in May from a downwardly revised 5.334M in April
  • Euclid Tsakalotos, Greece's new finance minister, has given an impressive presentation to the Eurogroup, according to The Guardian
    • It is not even clear if the other eurozone nations want Greece to remain in the single currency bloc after Greek voters snubbed the rest of Europe on Sunday
  • JP Morgan's Duration Survey measures client positioning
    • The survey for the week ending July 6 showed that active client net longs fell to -42 from -8 in the prior two weeks' readings
      • This change is sentiment is what one would like to see around a bottom for the Treasury market. The change is consistent with capitulation on the part of the bulls
  • Yield Check:
    • 2-yr: -4 bps to 0.56%
    • 5-yr: -8 bps to 1.48%
    • 10-yr: -9 bps to 2.20%
    • 30-yr: -9 bps to 3.00%

10-Yr: +24/32… EUR/USD: 1.0946… USD/JPY: 122.33…

09:07AM ET
Trade Deficit is Smaller Than Expected

  • The U.S. trade deficit widened less than expected to 41.9 bln in May from a downwardly revised $40.7 bln in April. The Briefing.com consensus estimate was -$42.5 bln
    • There wasn't anything unusual in the data. A port strike on the west coast temporarily caused a large bout of volatility this year, and the trade deficit swung up from $37.2 bln in February to $50.6 bln in March and then came back down to $40.7 bln in April
    • The goods deficit increased $1.2 bln in May, from $60.3 bln in April to $61.5 bln. The services surplus was virtually unchanged at $19.6 bln
    • Exports declined by $1.5 bln to $188.6 bln in May from $190.1 bln in April. Strong sales of fuel oil ($0.5 bln) and other petroleum products ($0.5 bln) helped drive a $0.8 bln increase in industrial supplies and materials exports. Those gains, however, were more than offset by a $2.4 bln decline in capital goods excluding autos. Big drops in civilian aircraft (-$1.2 bln), industrial machines (-$0.4 bln), and industrial engines (-$0.4 bln) led the decline
    • Imports declined by $0.3 bln, from $230.8 bln in April to $230.5 bln in May. A large portion of the decline was the result of reduced fracking activities as drilling and oilfield equipment imports fell by $0.8 bln. Declines were also reported in industrial supplies and materials (-$0.6 bln) and foodstuffs (-$0.4 bln). Motor vehicle imports increased by $0.9 bln
    • The net petroleum trade deficit continued to decline. It fell from $6.8 bln in April to $5.8 bln in May. That deficit was more than two-and-a-half times its current level ($15.2 bln) just one year ago
  • Treasuries remain significantly higher ahead of the U.S. equity open
  • Yield Check:
    • 2-yr: -2 bps to 0.57%
    • 5-yr: -5 bps to 1.51%
    • 10-yr: -7 bps to 2.22%
    • 30-yr: -7 bps to 3.02%

10-Yr: +18/32… EUR/USD: 1.0931… USD/JPY: 122.46…

08:23AM ET
High-Quality Sovereign Debt Rips Higher

  • Manufacturing Production in the U.K. fell 0.6% m/m in May versus a 0.4% decline April. The report missed expectations and sent the 10-year Gilt yield down a quick 5 bps
  • German Industrial Production was flat m/m in May versus expectations for growth and a 0.6% jump in April
  • Swiss unemployment for June came out in line at 3.3%
  • The Greek news outlet Kathimerini reported that 16 out of the 18 non-Greek countries in the eurozone want Greece out
  • Yield Check:
    • France, 10-yr OAT: -10 bps to 1.15%
    • Germany, 10-yr Bund: -9 bps to 0.68%
    • Greece, 10-yr note: +22 bps to 17.89%
    • Italy, 10-yr BTP: -11 bps to 2.28%
    • Portugal, 10-yr note: -3 bps to 3.13%
    • Spain, 10-yr Bono: -4 bps to 2.29%
    • U.K., 10-yr Gilt: -12 bps to 1.91%

10-Yr: +17/32… EUR/USD: 1.0925… USD/JPY: 122.44…

07:35AM ET
Treasuries Follow Through on Monday's Gains

  • Treasury coupon securities are broadly higher this morning in a curve-flattening trade. EUR/USD touched its lowest level since early June and now stands down 0.82% to $1.0964
  • Yield Check:
    • 2-yr: -2 bps to 0.57%
    • 5-yr: -3 bps to 1.53%
    • 10-yr: -4 bps to 2.24%
    • 30-yr: -6 bps to 3.02%
    • 10-yr Bono/Bund: +9 bps to 165 bps
  • International News:
    • The Eurogroup of eurozone finance ministers is still awaiting Greece's first proposal post-referendum
      • Preliminary reports of the proposal, from Suddeutsche Zeitung, indicate that the proposal will be quite similar to those before it
      • Debt writedowns remain an important stumbling block
      • Greece owes 3.5 bln euro to the ECB on July 20th
    • The Shanghai Composite fell 1.29% to 3,727.13. The index is now down 25.80% over the past month and the ChiNext Index of more speculative companies is down 39.47%
    • German Industrial Production was unchanged m/m in May, short of expectations and the 0.6% jump in April
    • In the U.K., Manufacturing Production fell 0.6% m/m versus expectations for a rise. MP fell 0.4% in April
    • The Reserve Bank of Australia held its cash rate steady at 2.00%
      • RBA Governor Stevens said that monetary conditions remain loose despite turbulence in China and Greece
  • Data out Today:
    • May Trade Balance (08:30 ET)
    • May JOLTS - Job Openings (10:00 ET)
    • May Consumer Credit (15:00 ET)
  • Treasury Auction:
    • $24 bln 3-year note auction, (results at 13:00 ET)

10-Yr: +11/32… EUR/USD: 1.0964… USD/JPY: 122.43…

03:43PM ET
Treasuries Trade up Towards Close

  • The U.S. Treasury complex gapped higher on Sunday night after Greece voters rejected the latest proposal from their government's official creditors. The initial panic faded quickly and governments sold off into mid-morning but found renewed buying interest and ended the session significantly higher in a curve-flattening trade
  • Yield Check:
    • 2-yr: -4 bps to 0.59%
    • 5-yr: -7 bps to 1.56%
    • 10-yr: -9 bps to 2.29%
    • 30-yr: -10 bps to 3.09%
  • News:
    • The ISM Non-manufacturing Index increased to 56.0 in June from 55.7 in May. The Briefing.com consensus was for 56.3
      • Business activities accelerated as the related index increased to 61.5 in June from 59.5 in May
      • The orders data were strong, which should help keep production growth moving in a positive direction. The New Orders Index rose to 58.3 in June from 57.9 in May. The Backlog of Orders Index exited a contraction and increased to 50.5 from 48.5 in May
      • The Employment Index fell to 52.7 in June from 55.3 in May
    • The ECB will continue the ELA (Emergency Liquidity Assistance) for Greek banks but will alter the haircuts on collateral
    • Greece's finance minister, Yanis Varoufakis, resigned his position after the results were released, saying that Prime Minister Tsipras had judged his departure "to be potentially helpful to him in reaching an agreement"
    • The Greek government will present a new proposal to the Eurogroup on Tuesday
      • Three opposition parties have declared their support for the current government in its negotiations with creditors
  • Commodities:
    • WTI crude: -7.40% to $52.72/bbl.
    • Gold: +0.34% to $1,167.40/troy oz.
    • Copper: -3.93% to $2.5275/lb.
  • Currencies:
    • EUR/USD: -0.56% to $1.1053
    • USD/JPY: -0.35% to 122.45
  • Data out Tuesday:
    • May Trade Balance (08:30 ET)
    • May JOLTS - Job Openings (10:00 ET)
    • May Consumer Credit (15:00 ET)
  • Treasury Auction:
    • $24 bln 3-year note auction (results at 13:00 ET)

10-Yr: +25/32… EUR/USD: 1.1051… USD/JPY: 122.46…

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