The Market at 03:19PM ET
Moving the Market
MBA Mortgage Index: Actual 11.6%, prior 5.6%
CPI: Actual 0.1%, consensus 0.0%, prior -0.2%
Core CPI: Actual 0.1%, consensus 0.2%, prior 0.0%
30Y Settles at 3.00%:
- Treasuries booked small losses.
- The complex was bid into the cash open before pressing to its worst levels of the day in response to the mixed CPI (0.1% actual v. 0.0% expected) and Core CPI (0.1% actual v. 0.2% expected) data.
- Maturities trimmed those losses over the course of the afternoon as equity markets turned red, but were unable to reclaim their respective flat lines.
- Up front, the 2Y edged up +2bps to 0.370%. Action tested resistance in the .400% area before pulling back.
- Selling had the biggest impact on the belly as the 5Y added +3.1bps to 1.441%. The 1.500%/1.550% area is home to some resistance.
- The 10Y climbed +2.1bps to 2.229%. The benchmark yield finished at a one-week high as action moves towards 2.300% resistance.
- The 30Y lagged, adding +1.6bps to 3.000%. Resistance in the 3.050% area is in focus.
- A steeper curve persisted as the 2-10-yr spread widened to 186bps.
- Precious metals went off near the lows with gold -$8 @ $1244 and silver -$0.39 @ $17.16.
- Data: Initial and continuing claims (8:30), FHFA Housing Price Index (9), and leading indicators (10).
Dollar Continues to Climb:
- The Dollar Index drifts on session highs near 85.70 amid a mostly lackluster trade.
- The Index jumped to its best levels of the day in response to the slightly hotter than expected CPI data, and has spent the remainder of the session near the highs.
- EURUSD is -60 pips @ 1.2650 after several attempts at reclaiming 1.2800 were unsuccessful over the last couple of sessions. Today's weakness comes following reports 11 banks from the region will fail this weekend's stress tests. The 1.2600 support level is all that prevents a test of two-year lows. Flash Manufacturing and Services PMI data from across the Eurozone will be released tomorrow.
- GBPUSD is -60 pips @ 1.6055 as sellers have remained in control throughout the session. Sterling has been under pressure since this morning's release of the latest MPC votes showed a 7 to 2 margin in favor of keeping policy on hold. British data scheduled for tomorrow includes retail sales, BBA Mortgage Approvals, and CBI Industrial Order Expectations.
- USDCHF is +40 pips @ .9535 as action presses its best levels of the session. A breakout above the .9550 area puts 15-month highs near .9700 in play.
- USDJPY is +10 pips @ 107.15 as a light bid continues for a fifth straight day. Overnight, the latest trade data showed a 27th straight monthly deficit despite exports improving 6.9% YoY thanks to help from the weaker yen and iPhone 6 launch.
- AUDUSD is +5 pips @ .8785 as an uneventful trade nears the close. A break from the .8650/.8850 range that has been in place over the past month looks to be imminent. Australia's NAB Business Confidence is due out tonight. Tonight's Chinese data is limited to HSBC Flash Manufacturing PMI.
- USDCAD is unchanged @ 1.1225 amid a volatile trade. The pair jumped to its best levels of the day near 1.1290 after this morning's retail sales (-0.3% actual v. 0.1% expected) data missed estimates. However, the pair tumbled to session lows after the Bank of Canada held its key rate steady at 1.00% while suggesting inflation risks are "roughly balanced." A shooting near Canada's Parliament has kept the pair in a tight range throughout the afternoon as details are still emerging. Tomorrow, Bank of Canada Governor Stephen Poloz will testify in front of the Senate Standing Committee on Banking, Trade, and Commerce.
Treasuries Retest the Lows:
- Treasuries are testing session lows.
- Some mid-morning buying lifted maturities to previous support, but sellers held strong and prevented the bulls from reclaiming those levels.
- A +3.5bp advance has the 10Y flirting with the 2.250% level.
- Selling at the long end has the 30Y +2.5bps and back above the 3.000% threshold. Resistance near 3.050% remains firmly in focus.
- Steepening persists along the yield curve with the 2-10-yr spread trading 186.5bps.
- Precious metals remain trapped near their worst levels of the day with gold -$8 @ $1244 and silver -$0.36 @ $17.18.
Euro Tumbles Below 1.2750: The Dollar Index has rallied to its best level in a week. The dollar saw a boost following the release of the CPI number, which showed the headline figure come in slightly hotter than expected. It should be noted that the core CPI figure came in cool. Still dollar bulls resumed their push higher after the Index held 85.00 support earlier this week. Focus will turn to the overnight release of the first glance at October manufacturing numbers.
- The euro tumbled through the 1.2750 level and slipped back into the 1.2600 area as the dollar rallied. Some of the selling is being attributed to discussions of further easing by the ECB. While there has been plenty of rhetoric on the potential for ECB, there have been few meaningful programs actually implemented. So markets are continually looking for implementation and agreement among members.
- The pound is lower this morning following the release of dovish BoE minutes. The central bank noted weakness in the euro area that was cause for concern, which could delay a rate hike.
- The yen continues to slide lower as risk returns to the markets. Yen is now trading at 107.20. Aiding the weakness was another trade deficit reported by the country. The recent turn down in the economy has also led to politicians calling for a delay of the next round of a consumption tax hike.
Yields March Higher:
- Treasuries press session lows as U.S. equity markets drift little changed at the open.
- Early selling has yields at their highest levels in a week as the entire curve has now recovered from Wednesday's steep slide.
- Up front, the 2Y is +3.2bps @ 0.382% as action climbs towards 0.400% resistance.
- Modest selling in the belly has the 5Y +4.7bps @ 1.457%. Minor resistance stands in the way of a move into the 1.550% region.
- The 10Y trades +3.8bps @ 2.246% and continues its march towards 2.300% resistance.
- At the long end, the 30Y holds +3.1bps @ 3.015%. Traders have their sights set on resistance in the 3.050% region.
- A steeper curve has developed as the 2-10-yr spread trades 186.5bps.
- Precious metals remain under pressure with gold -$8 @ $1244 and silver -$0.38 @ 17.17.
- Treasuries have slipped into negative territory and are testing their worst levels of the session following the mixed CPI (0.1% actual v. 0.0% expected) and Core CPI (0.1% actual v. 0.2% expected) data.
- Modest selling is having the biggest impact on the belly as the 5Y trades +1.9bps @ 1.429%. The yield is contending with its highest levels in over a week.
- The 10Y is +1bps @ 2.218%. Little resistance stands in the way of a move up to 2.300%.
- Light selling at the long end has the 30Y +0.2bps @ 2.986%.
- Little change along the curve has the 2-10-yr spread holding at 185bps.
- Precious metals have tumbled to fresh lows with gold -$8 @ $1244 and silver -$0.28 @ $17.27.
- Yields are flat to lower across Europe following reports 11 banks may fail this weekend's stress test.
- German Bunds hold small gains following today's uncovered 30Y auction. The auction missed its EUR2 bln target while drawing 1.77% (2.25% previous) and a 1.2x bid/cover. The 10Y holds -1bp @ 0.860%.
- UK Gilts are little changed after the latest MPC votes showed a 7 to 2 margin in favor of keeping the Official Bank Rate unchanged at 0.50%. The 10Y is flat @ 2.175%.
- French OATs hold small gains amid a mostly uneventful session. A -2bp drop has the 10Y down to 1.285% where it tests support dating back to the end of September.
- Greek Government Bonds continue to attract bids with a -58bp plunge pushing the 10Y down to 7.185%. Last week, the yield was briefly above 9.000%.
- Other peripheral yields press lower with the Italy and Spain both seeing their 10Y lower by -3bps @ 2.480% and 2.180%, respectively.
MPC Votes Weigh on Sterling:
- The Dollar Index hovers on session highs near 85.55.
- Traders have 86.00 in the crosshairs as a breakout above the level puts the four and a half-year high just shy of 87.00 in play.
- EURUSD is -20 pips @ 1.2690 as trade presses to a one-week low. The single currency is slipping for the fourth time in five sessions as some jitters persist ahead of the weekend stress test results. A quiet day for news and data has made for a mostly uneventful trade.
- GBPUSD is -65 pips @ 1.6050 as selling takes hold following the release of the latest MPC votes. Sterling slid to the 1.6000 level after the votes showed a 7 to 2 margin in favor of keeping the Official Bank Rate unchanged at a record low 0.50%. Traders are keeping a close eye on the 1.5900 area, which is home to 11-month lows.
- USDCHF is +10 pips @ .9500 as trade ticks higher amid a quiet session. The pair has been limited to a 40 pip range in early action as trade mimics the euro.
- USDJPY is -10 pips @ 107.00 as action continues to test minor resistance in the area. The choppy trade has developed in response to Japan's trade deficit expanding to JPY1.07 trln (JPY0.91 trln expected, JPY0.91 trln previous) despite a 6.9% jump in exports that was aided by the weaker yen and the need for iPhone 6 parts. The 50 dma (106.51) continues to provide support.
- AUDUSD is +10 pips @ .8790 following the mixed CPI (0.5% QoQ actual v. 0.4% QoQ expected) and Trimmed Mean CPI (0.4% QoQ actual v. 0.6% QoQ expected) data. The .8650/.8850 range that has been in place over the past month is looking likely to see a break in one direction or another in the coming days. USDCNY slipped to 6.11825, a fresh seven-month low.
- USDCAD is +10 pips @ 1.1235 as trade drifts little changed ahead of retail sales data and the Bank of Canada rate decision. Levels to watch include 1.1200 support and 1.1300 resistance.
Treasuries Firm in Early Trade:
- Treasuries are bid ahead of the cash open.
- Overnight ranges remain wider than normal, expanding to as much as 4bps.
- Up front, the 2Y is flat at 0.350%. Action holds at the midpoint of 0.300% support and 0.400% resistance.
- In the belly, the 5Y holds -0.5bps @ 1.405%.
- The 10Y trades -1.4bps @ 2.194%. The benchmark yield ended yesterday's session at a one-week high.
- Outperformance at the long end has the 30Y -1.9bps @ 2.965%. The yield has threatened the 3.000% barrier for much of the past week, but has been unable to retake the level.
- A slightly flatter curve has taken hold with the 2-10-yr spread trading 184.5bps.
- Precious metals are under pressure with gold -$6 @ $1246 and silver -$0.18 @ $17.37.
- Data: MBA Mortgage Index (7) and CPI (8:30).
Treasuries Slip Amid Choppy Trade:
- Treasuries booked small losses amid a choppy trade.
- The complex held a modest bid into early morning trade, but surrendered those gains as reports suggested the European Central Bank was considering corporate bond purchases.
- Those reports were later refuted, but the complex remained in negative territory as existing home sales (5.17M actual v. 5.11M expected) outpaced estimates.
- Yields would make minor highs following the upbeat report before spending the remainder of the day locked in a tight 2bp range at key levels.
- Up front, the 2Y ticked up +0.4bps to 0.350%. Action settled at the midpoint of 0.300% support and 0.400% resistance.
- In the belly, the 5Y added +1.5bps to 1.410%. A rather uneventful session saw the yield just below a one-week high.
- The 10Y gained +2.7bps to 2.208%. The benchmark yield managed to regain the 2.200% mark, which bond guru Jeff Gundlach suggested would be the bottom for the year.
- At the long end, the 30Y climbed +2.5bps to 2.984%. Recent trade has seen the yield test the psychologically important 3.00% barrier, but a breakout remains elusive.
- Selling swung the curve steeper as the 2-10-yr spread widened to 191bps.
- Precious metals gained with gold +$4 @ $1249 and silver +$0.15 @ $17.50.
- Data: MBA Mortgage Index (7) and CPI (8:30).
Dollar Grinds Higher:
- The Dollar Index holds just off session highs as trade nears the 85.30 level.
- Early selling caused action to probe 85.00 support, but buyers once again emerged in defense of the level.
- EURUSD is -60 pips @ 1.2735 as trade holds near its worst levels of the day. The single currency has come under pressure following conflicting reports the European Central Bank is considering a foray into corporate bond buying. Today's selling has dropped action below 1.2750 support, setting up a test of the key 1.2600 area.
- GBPUSD is -35 pips @ 1.6125 as sellers take control for the first time in five sessions. Sterling once again struggled near the 1.6200 level as sellers stepped up in response to the public sector net borrowing miss. The latest Bank of England MPC votes will be released tomorrow.
- USDCHF is +45 pips @ .9475 as action holds near the highs. The pair tested .9400 support early, but has found a bid amid the weakness in the euro.
- USDJPY is -20 pips @ 106.75. Action over the past week has been trapped between the 50 dma and resistance in the 107.00 area, but that is likely to change with Japan's trade balance due out tonight.
- AUDUSD is +10 pips @ .8790 after surrendering the majority of its early gains. The hard currency drifted to its worst levels of the session after the Reserve Bank of Australia minutes suggested "a period of stability in interest rates" and then rallied to session highs as China's GDP topped estimates. However, trade has slowly leaked lower over the course of the day. A break from the .8650/.8850 range that has been in place over the past month looks imminent. Australian data set for tonight includes CPI and Trimmed Mean CPI.
- USDCAD is -65 pips @ 1.1225 as trade dives off its best levels since July 2009. Support in the 1.1200 area will be in focus tomorrow as Canada's retail sales cross the wires before the Bank of Canada interest rate decision.