Updated: 03-31-2015

The Market at 11:50AM ET
10-Year: +3/32…1.94…
EUR/USD: 1.0751…
USD/JPY: 119.96…

Moving the Market

- Richmond Fed President Lacker (FOMC voter and hawk): Sees "strong case" for rate hike in June, unless future data is exceptionally weak. Sees past weak data as transitory and resulting from the strong dollar and low energy prices

- January Case-Shiller 20-City Index: Actual 4.6%, Briefing.com Consensus 4.6%, Prior 4.4% (revised from 4.5%)

- March Chicago PMI: Actual 46.3, Briefing.com Consensus 52.0, Prior 52.9

- March Consumer Confidence: Actual 101.3, Briefing.com Consensus 96.4, Prior 98.8 (revised from 96.4)

- Kansas City Fed President George (non-FOMC voter) speaks on the U.S. economy (15:00 ET)

11:50AM ET
Equity Rally Continues

  • Treasuries have pulled back from their highest levels of the day, as equities make fresh morning highs
  • Yield check:
    • 2-yr: -2 bps to 0.56%
    • 5-yr: -2 bps to 1.38%
    • 10-yr: -1 bp to 1.94%
    • 30-yr: -1 bp at 2.54%
  • Outflows from Greek banks slowed to 3 billion euro in March, bringing the 4-month total to 28 billion euro. That leaves Greek banks with total deposits of 137 billion euro
  • One of Angela Merkel's fellow Conservatives in the Bundestag, Peter Gauweiler, has resigned from his position in protest of her handling of the negotiations with Greece
    • The political situations in both Greece and Germany are restricting the latitude of the negotiating parties to compromise

10-Yr: +3/32… EUR/USD: 1.0751… USD/JPY: 119.96…

11:25AM ET
Dollar Moves Above 98, Jobs on Tap: The Dollar Index was able to climb back above 98 as we head toward the end of the quarter. Market participants are moving back into the greenback ahead of the end of the week jobs report. Positioning will happen a little earlier given the shortened holiday trade period. Economic data from this morning was mixed. We saw Case Shiller come in line with expectations, March Chicago PMI miss and March Consumer Confidence beat expectations. 

  • The euro has been offered as the dollar moves higher. There is growing concern over the Greek situation. Commentary from both sides point to a divide in the next step of the crisis. And this is all coming ahead of an April 9 IMF payment that some believe Greece will miss. It was a busy day on the economic front with German Retail Sales (better than feared), French Consumer Spending (miss), German Unemployment Change (better than expected), Eurozone CPI (higher than expected but still low), and Eurozone Unemployment (slight q/q improvement) providing a relatively upbeat picture on for the region.
  • The pound is holding the 1.48 level against the dollar. Sterling has been supported by an upward revision to Q4 GDP (+0.6% from +0.5%). The country's Current Account deficit was larger than expected as it continues to show signs of trade being hurt by a weakening euro. 
  • The yen continues to test the 120 level for support as the dollar pushes higher. It was light on the economic front with better than feared Housing Starts data being the most interesting feature.

10-Yr: +05/32… EUR/USD: 1.0733… USD/JPY: 120.05…

10:57AM ET
Government Bonds Rise on Bad PMI

  • While consumer confidence rose unexpectedly in March, Treasury investors are focusing on actual behavior further upstream in the economy
  • The Chicago PMI, while not usually a decisive piece of data, has encouraged investors that the "data-dependent" Fed will be more patient than feared earlier this month
  • Yield check:
    • 2-yr: -2 bps to 0.56%
    • 5-yr: -3 bps to 1.38%
    • 10-yr: -2 bps to 1.93%
    • 30-yr: -2 bps to 2.53%
  • The US Dollar Index has backed off of highs, up only 0.33% to 88.30

10-Yr: +5/32… EUR/USD: 1.0756… USD/JPY: 119.90…

10:16AM ET
Treasuries Little Changed

  • March Chicago PMI missed badly (actual 46.3, Briefing.com consensus 52.0, prior 45.8) and March Consumer Confidence beat expectations handily (actual 101.3, Briefing.com consensus 96.4, prior 96.4)
  • 2's and 10's are near their highs of the day, while 5's and 30's are range-bound
  • Equities have been tracking higher from their overnight lows
    • The S&P 500 is down 0.37% to 2,078.49
  • Yield check:
    • 2-yr: -2 bps to 0.56%
    • 5-yr: -1 bp to 1.39%
    • 10-yr: -1 bp to 1.94%
    • 30-yr: unch at 2.55%
  • Data review:
    • The Chicago PMI increased to 46.3 in March from 45.8 in February. The Briefing.com Consensus expected the index to increase to 52.0. In January, the Chicago PMI stood at 59.4. 
    • The sudden drop into a significant contraction in February was immediately blamed on extreme weather conditions. As weather conditions returned to normal in March, manufacturing activities were expected to return to their previous expansionary cycle. That did not happen. 
    • Conditions did modestly improve, but the overall index remained firmly in a contraction for a second consecutive month. The pullback that began in February was likely not the result of temporary weather problems. Furthermore, the underlying details in March suggest that weakness that started in February may be the beginning of a longer and weaker trend. 
    • The overall production index increased to 49.3 in March from 44.8 in February, but remains underneath the expansion/contraction threshold. The contraction in both new (42.3 from 42.0) and unfilled (41.9 from 41.1) orders were virtually unchanged. There are not enough unfilled orders on the books to push production back into an expansion without a sizable increase in new orders growth. 
    • One positive note, employment returned to an expansion, albeit a weak one, as the related index increased to 50.3 from 49.8 in February.

10-Yr: +2/32… EUR/USD: 1.0736… USD/JPY: 120.05…

09:20AM ET
Case Shiller in Line with Expectations

  • The Case-Shiller 20-City Housing Price Index rose 4.6% in January, in line with expectations and higher than the the 4.5% increase in December
    • Market reaction was muted
  • Yield check:
    • 2-yr: -2 bps to 0.57%
    • 5-yr: -1 bp to 1.40%
    • 10-yr: unch at 1.95%
    • 30-yr: +1 bp to 2.56%
  • JP Morgan released its latest duration survey, showing that among active clients, there are more net short positions than there have been since October 2014
    • Among all clients, there are the fewest net shorts since the beginning of March
  • The yield on the 2-year German Schatz went below -0.25% today. It's no wonder that economic sentiment is improving in the eurozone
  • The Financial Times of London ran an op-ed by a former member of the Bank of England's Monetary Policy Committee today, DeAnne Julius, echoing some of our remarks from yesterday and expanding upon them in important ways:
    • "[European] banks are better capitalised and Greek debt is a smaller portion of their reserves now than two years ago."
    • "the rise of anti-euro protest parties in Spain, France, and even Germany has shifted the debate from dry economics to fiery politics. The willingness of other electorates to foot the bill for the generous retirement benefits and weak tax collection in Greece has worn thin."
  • Greece simply does not have the negotiating position that it had in 2012

10-Yr: unch… EUR/USD: 1.0749… USD/JPY: 119.87…

08:16AM ET
Eurozone Sovereign Debt Yields Decline

  • European sovereign debt prices rose today as the European Council president, Donald Tusk, warned that there was little chance of a Greek deal before the Easter holiday 
    • Greek 10-year yields rose 29 basis points to 11.28%
  • Eurozone unemployment missed expectations at 11.3%, but this level is still the best since 2012
  • March Headline CPI in the eurozone came out in line with expectations at -0.1% y/y, but Core CPI missed estimates at 0.6% y/y
  • The estimate for U.K. GDP growth in 2014 was revised up to 2.8% from a previous estimate of 2.6%
    • For Q4 of 2014, GDP growth was revised up to 0.6% from 0.5%
    • The U.K. may have the fastest growth rate of the advanced economies this year, despite uncertainty surrounding the upcoming national election
  • German retail sales in February beat estimates, declining only 0.5%
    • Economic sentiment indices in the eurozone have been exceeding expectations lately, but it will be important to see the changes in sentiment translate into higher spending and investment by consumers and businesses
  • European yields:
    • France, 10-yr OAT: -3 bps to 0.48%
    • Germany, 10-yr Bund: -2 bps to 0.16%
    • Greece, 10-yr note: +30 bps to 11.28%
    • Ireland, 10-yr note: -2 bps to 0.76%
    • Italy, 10-yr note: -4 bps to 1.27%
    • Portugal, 10-yr note: -6 bps to 1.70%
    • Spain, 10-yr Bono: -4 bps to 1.23%
    • U.K., 10-yr Gilt: -1 bp to 1.59%

10-Yr: +1/32… EUR/USD: 1.0767… USD/JPY: 119.86…

07:30AM ET
Treasuries Little Changed but Curve Steepens:

  • The front end and belly of the curve rallied overnight, as global equities sold off amid pervasive pessimism regarding Greece's membership in the eurozone
  • Yield check:
    • 2-yr: -2 bps to 0.57%
    • 5-yr: -1 bp to 1.39%
    • 10-yr: unch at 1.95%
    • 30-yr: unch at 2.55%
  • International News:
    • The euro currency and European equities declined, while European sovereign debt rallied, as European Council president Donald Tusk said that a Greek deal before Easter was unlikely. He went on to say that an agreement could come by the end of April
      • Yields on Greece's 10-year notes rose to 11.22%, up 23 basis points on the day
    • In the U.K., GDP growth for 2014 y/y was revised up to 2.8%, beating expectations. That was the fastest growth rate since before the financial crisis
      • GDP for Q4 was revised up to 0.6% from the previous estimate of 0.5% and in line with growth in Q3
    • CPI for the eurozone was -0.1% y/y in March, in line with expectations, and higher than the reading of -0.3% in February
      • Core inflation, however, fell to 0.6% in March, lower than core inflation in February of 0.7%
    • Eurozone unemployment missed expectations at 11.3%, but was the lowest since May of 2012
  • Data Out Today: 
    • January Case-Shiller 20-City Index (09:00 ET) 
    • March Chicago PMI (09:45 ET)
    • March Consumer Confidence (10:00 ET)
  • Fed Speakers:
    • Richmond Fed President Lacker (FOMC voter) speaks on the "Economic Outlook, March 2015" (08:00 ET)
    • Cleveland Fed President Mester (non-FOMC voter) moderates panel before the 2015 Financial Markets Conference (10:15 ET)
    • Kansas City Fed President George (non-FOMC voter) speaks on the U.S. economy (15:00 ET)

10-Yr: -1/32… EUR/USD: 1.0751… USD/JPY: 119.90…

03:37PM ET
Governments Mixed:

  • Despite the major U.S. equity indices being up over 1% and pending home sales surpassing expectations, 2's,5's, and 10's ended higher for the day
  • Yield check:
    • 2-yr: -1 bp to 0.59%
    • 5-yr: -2 bps 1.42%
    • 10-yr: -1 bp to 1.96%
    • 30-yr: +1 bp to 2.56%
  • News:
    • Personal income rose 0.4% in February, ahead of the Briefing.com consensus estimate of 0.3%. The increase in January was 0.4%, revised up from 0.3%
    • Personal spending rose 0.1% in February, lower than the Briefing.com consensus of 0.2%, but higher than the reading for January of -0.2%
    • Core personal consumption expenditure prices rose 0.1% in February, in line with the Briefing.com consensus and the prior reading
    • The European Commission's economic sentiment index for March rose to 103.9, ahead of expectations and the 102.3 from February
      • This data point continues the steady drumbeat of improving sentiment in Europe
    • The Greek Prime Minister, Alexis Tsipras, made a speech before the Greek parliament, criticizing the opposition party
    • Negotiations between Greece and its creditors made little headway over the weekend
  • Commodities:
    • WTI Crude fell 0.70% to $48.53/bbl
    • Gold fell 13.90 to 1185.90/troy oz.
    • Copper rose 0.40% to $2.78/lb.
  • Currencies:
    • EUR/USD: -0.71% to $1.0813
    • USD/JPY: +0.87% 120.17
  • Data Out Tuesday:
    • Richmond Fed President Lacker (FOMC voter) gives a talk titled, "Economic Outlook, March 2015" (08:00 ET)
    • January Case-Shiller 20-City Index (09:00 ET)
    • March Chicago PMI (09:45 ET)
    • March Consumer Confidence (10:00 ET)
    • Cleveland Fed President Mester (non-FOMC voter) moderates panel before the 2015 Financial Markets Conference (10:15 ET)
    • Kansas City Fed President George (non-FOMC voter) speaks on the U.S. economy (15:00 ET)

10-Yr: +2/32… EUR/USD: 1.0815… USD/JPY: 120.19…

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