Updated: 12-18-2014

The Market at 11:49AM ET
10-Year: -18/32…2.209…
EUR/USD: 1.2291…
USD/JPY: 118.75…

Moving the Market

Initial Claims: Actual 289K, consensus 292K, prior 294K (revised 295K)

Continuing Claims: Actual 2373K, consensus 2510K, prior 2514K (revised 2520K)

Philly Fed: Actual 24.5, consensus 26.0, prior 40.8

Leading Indicators: Actual 0.6%, consensus 0.5%, prior 0.9% (revised 0.6%)

Treasury will hold a $16B 5Y TIPs reopening 

11:49AM ET
DXY Pushes Above 89- The Dollar Index pushed above the 89 level following yesterday's FOMC decision. Markets were awaiting the Fed's decision on considerable time. The Fed did leave considerable time language in the statement but in a different area. The FOMC tweaked the 'considerable time' language to 'patience'. At the end of the day the Fed remains data dependent as it has been saying for a few years. Of interest there then was the lower inflation outlook members forecast for 2015. Markets continue to view mid-2015 as the likely time frame for when the Fed is set to raise rates. Economic data this morning was weak as surveys (Markit Services, Philly Fed) continue to disappoint. But it is the Fed statement that continues to dominate headlines today. 

  • The euro has tumbled back into the 1.22 area. The rally in the dollar has helped put selling pressure on the single currency. The markets will be paying close attention to an EU Economic Summit that will be held over the next couple of days. Hints of any potential monetary easing will be important. But also markets will be looking at commentary on any potential fiscal reform and on Greece. The latter is of course undergoing an important confidence vote in the government.
  • The pound has rallied off the 1.5550 level this morning to push back to 1.5660. 1.5550 has been setting up as low end support for the recent trading range for sterling. This marks the third time it has been able to bounce off this area in the past two weeks. A better than expected retail sales number has helped provide a boost.
  • The yen is running into resistance at 118. Yen would eventually pullback to 119.30 but is now moving back higher. The recent strengthening in the yen is showing signs of cooling following the recent volatility. 118 will set up as a key level of resistance moving forward. 
  • The Russian ruble is settling around the 60 level and remains a key focus for markets. This morning President Putin held a four hour press conference discussing the situation in Russia. The ruble whipped around in the 57-63 area during the speech which was relatively aggressive but nothing outside of expectations for Putin. The Bank of Russia is now announcing that it will recapitalize systemcially important banks and hold talks with brokers. 
  • The Swiss franc is also in focus as the Swiss National Bank moved rates into negative territory. This has led to the franc weakening to 0.97 against the dollar. It would appear the SNB is preparing for a EU QE as it attempts to maintain a 1.20 peg against the euro. That cross is currently trading at 1.2037.

10-Yr: -18/32… EUR/USD: 1.2291… USD/JPY: 118.75…

10:06AM ET

Treasuries Hold on Lows After Mixed Data:
  • Treasuries are seeing little reaction to the mixed Philly Fed (24.5 actual v. 26.0 expected) and leading indicators (+0.6% actual v. +0.5% expected) data
  • Maturities across the complex remain near their worst levels of the session. 
  • Early selling is having the biggest impact at the long end of the curve with the 30Y +5.7bps @ 2.809%. 
  • The 10Y is higher by +5.4bps @ 2.202% and has reclaimed the key 2.200% level. 
  • A +4.2bp advance has the 5Y @ 1.655% and flirting with both the 100 and 200 dma. 
  • Selling has swung the curve steeper as the 2-10-yr spread trades 157.5bps
  • Precious metals are fighting to hold into their gains with gold +$6 @ $1200 and silver +$0.12 @ $16.05.
  • This afternoon, Treasury will reopen $16B 5Y TIPs

10-Yr: -16/32… EUR/USD: 1.2278… USD/JPY: 119.15…

08:34AM ET
Data Reaction:

  • Treasuries are seeing little response to the better than expected initial (289K actual v. 292K expected) and continuing (2373K actual v. 2510K expected) claims data
  • Early selling has yields across the curve up close to +2bps. 
  • The 10Y trades +2.4bps @ 2.172% and holds at a one-week high.
  • Little change along the curve has the 2-10-yr spread stuck @ 155bps.
  • Precious metals remain bid with gold +$11 @ $1206 and silver +$0.18 @ $16.11.
  • Philly Fed and leading indicators are due out at 10am ET.

10-Yr: -06/32… EUR/USD: 1.2283… USD/JPY: 118.86…

08:01AM ET
European Yields

  • Yields trade mixed across Europe. 
  • German Bunds hold small losses after Ifo Business Climate (105.5 actual v. 105.6 expected) fell short of estimates. A +1bp advance has the 10Y up to 0.600%. 
  • UK Gilts are under pressure following the strong retail sales report. Today's +6bp jump has the 10Y up to 1.835%. 
  • French OATs drift little changed amid a mostly uneventful session. The 10Y is lower by -1bp @ 0.870%. 
  • Greek Government Bonds are sharply higher after yesterday's election failed to produce a new president. Today's surge has the 10Y down -32bps @ 8.60%. 
  • Other peripheral countries are seeing their debt rally in response to the action in Greece. Both Italy and Spain saw their 10Y hit all-time lows, off a handful of bps to 1.910% and 1.71%, respectively. 
  • Yields in Switzerland are negative out to six years after the Swiss National Bank announced it would charge banks 25bps on deposits. The 10Y is lower by -5bps @ 0.25%.

10-Yr: -06/32… EUR/USD: 1.2292… USD/JPY: 118.84…

07:14AM ET

Franc Hits Two-Year Lows as Swiss National Bank Announces Negative Deposit Rate:
  • The Dollar Index holds small losses as action probes the 89.00 area. 
  • An overnight bid lifted action into the 89.50 area, marking the best levels since March 2009, but trade continues to struggle near the 200 mma (89.95).
  • EURUSD is -25 pips @ 1.2315 as trade presses back onto the December lows. The single currency is weaker after German Ifo Business Climate (105.5 actual v. 105.6 expected) fell short of estimates. Traders continue to watch the 1.2300 area as a breakdown would produce levels last seen in August 2012. 
  • GBPUSD is +80 pips @ 1.5655 as buying has developed in response to the strong retail sales (1.6% MoM actual v. 0.3% MoM expected) data. Today's bid has lifted sterling off key support near 1.5600 and has the bulls setting up for another run at the upper end of the range (1.6800). 
  • USDCHF is +45 pips @ .9775 after the Swiss National Bank announced it would begin charging banks 25bps on deposits beginning in 2015. The negative rate environment dropped the franc to a two-month low of 1.2100 against the euro, but EURCHF is now 1.2040. 
  • USDJPY is flat @ 118.60 amid a mostly uneventful session. A breakout through the 119.00 region puts the recent highs near 122.00 in focus. 
  • AUDUSD is +65 pips @ .8185 as action rallies off 54-month lows. The bounce comes as trade tests key support in the area. USDCNY climbed +0.3% to 6.2157, the highest since June, as home prices fell in all 70 cities surveyed
  • USDCAD is -45 pips @ 1.1585 as action slips off its best levels since July 2009. A quiet day for news and data will likely have trade correlated to U.S. dollar moves.

10-Yr: -10/32… EUR/USD: 1.2306… USD/JPY: 118.70…

06:47AM ET

2Y Nears Highest Print Since April 2011:
  • Treasuries are lower into the cash open as the complex sees a second day of selling in response to yesterday's FOMC decision.
  • Maturities have not lost in two consecutive sessions since the first trading days of December. 
  • Overnight ranges remain wider than usual, expanding to 7bps in the belly of the curve.
  • Up front, the 2Y is +2.8bps @ 0.613%. The 0.650% area remains in focus as a breakout above the level would lead to the highest print since April 2011
  • In the belly, the 5Y is +1.2bps @ 1.624%. Resistance near 1.650% is being watched closely as both the 100 and 200 dma lurk in the vicinity. 
  • The 10Y trades +2bps @ 2.168%. The early weakness has the benchmark yield probing minor resistance in the 2.150% area. 
  • Selling at the long end has the 30Y +2.1bps @ 2.773%. October's low near 2.670% remains in focus. 
  • A slightly flatter curve has developed as the 2-10-yr spread trades 155.5bps. 
  • Precious metals are strong with gold +$12 @ $1206 and silver +$0.23 @ $16.16. 
  • Data: Initial and continuing claims (8:30), Philly Fed, and leading indicators (10).

10-Yr: -07/32… EUR/USD: 1.2321… USD/JPY: 118.60…

03:28PM ET

Yields Rise as Fed Signals Patience on Rates:
  • Treasuries finished on their lows as sellers took control following the latest Fed Statement.
  • The complex held modest losses into the cash open before the tame CPI (-0.3% MoM actual v. -0.1% MoM expected) and disappointing current account balance (-$100.3 bln actual v. -$95.0 bln expected) number provoked a rally back to the flat line.
  • However, maturities were unable to break into positive territory and steadily pushed lower into this afternoon's FOMC meeting.
  • The Fed kept the 'considerable time' language in the Statement, but changed its location, while also noting it will remain 'patient' as to when the first rate hike will occur.
  • Perhaps the most notable aspect of the Statement was the three dissenters (two hawks, one dove), highlighting some discord between members. However, it should be noted the two hawks who dissented (Dallas' Fisher and Philly's Plosser) will be retiring at year-end
  • Post-Fed selling pushed maturities to fresh lows into the cash close.
  • Up front, the 2Y added +2.5bps to 0.585%. The probed 0.550% support early, but managed to reclaim the level. 
  • In the belly, the 5Y surged +8.6bps to 1.612%. Action held 1.500% support before reclaiming the 50 dma and closing at a one-week high. 
  • The 10Y rallied +7.7bps to 2.148%. The benchmark yield is now flirting with minor resistance in the 2.150% region. 
  • The 30Y tacked on +5bps to 2.752%. Today's selling ran the yield off its lowest levels since September 2012. 
  • Selling swung the curve steeper as the 2-10-yr spread widened to 156.5bps
  • Precious metals went off near their lows with gold -$8 @ $1186 and silver flat @ $15.75. 
  • Data: Initial and continuing claims (8:30), Philly Fed, and leading indicators (10).

10-Yr: -21/32… EUR/USD: 1.2347… USD/JPY: 118.64…

02:34PM ET
Dollar Whips Around Post-Fed:

  • The Dollar Index pressed back to its flat line near 88.15 in as the FOMC Statement was digested, but is beginning to bounce off the level. 
  • Notable were comments from the Fed indicating it can be 'patient' with rate hikes
  • EURUSD is -60 pips @ 1.2450 as trade dipped to session lows near 1.2380 before surging to the best levels of U.S. trade near 1.2475. Today's action has tested both the upper and lower bounds of the range that has been in place over the past week, but has been unable to produce a breakout. Germany's Ifo Business Climate is due out tomorrow.
  • GBPUSD is -75 pips @ 1.5675 as trade has seen a whippy post-Fed trade. Sterling quickly dropped onto key support in the 1.5600 area before surging to 1.5700. In all, a mostly uneventful day as trade remains stuck in its 1.5600/1.5800 range. Britain's retail sales will cross the wires tomorrow. 
  • USDJPY is +95 pips @ 117.35 as action rallies off one-month lows. The pair has been whipped around as traders digest the Statement, but action has been immaterial.

10-Yr: -14/32… EUR/USD: 1.2425… USD/JPY: 117.57…

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