Updated: 08-18-2017

The Market at 11:44AM ET
10-Year: +2/32…2.190…
EUR/USD: 1.1742…
USD/JPY: 109.15…

Moving the Market

--Treasuries remain near Thursday's highs following cautious overnight action

--Preliminary August Michigan Sentiment - actual: 97.6; Briefing.com consensus: 94.0

11:44AM ET

Off the Highs

  • U.S. Treasuries have surrendered a good portion of their morning gains, sliding in response to a report from Axios, which claimed that White House officials expect President Trump's strategist Steve Bannon to be fired. Mr. Bannon has been described as a polarizing influence in the White House, therefore reports concerning his firing are being perceived as a development that could help the Executive branch narrow its ideological gap with Congress. The S&P 500 trades flat while the 2-yr note has turned negative.
  • Yield Check:
    • 2-yr: +1 bp to 1.31%
    • 5-yr: UNCH at 1.75%
    • 10-yr: -1 bp to 2.19%
    • 30-yr: UNCH at 2.77%

10-Yr: +2/32… EUR/USD: 1.1742… USD/JPY: 109.15…

11:36AM ET

Focus Turns to Jackson Hole: The Dollar Index has been holding at the 93.50 area. Last week the DXY tested 94 for resistance but was unable to hold above that level. That led to a decline back to 93.50 where it has been pinned for the majority of the week. This morning the preliminary look at Michigan Sentiment handily beat expectations. This should help set a positive tone for the Back to School season but is having little impact on the dollar as the major headwinds remain skepticism around the Trump Administration being able to implement its pro-growth agenda. Next week will be slow on the economic front. The primary focus will be on Fed Chair Janet Yellen's speech on financial stability (Friday at 10am ET). Markets will be searching or any hints at change to monetary policy.

  • The euro is trading at 1.1750 to end the week. German PPI numbers came in slightly higher than expected but a miss on the European Current Account will be the notable take away from today. The news helps highlight the recent comments from the ECB about concerns on the recent euro rally and its valuation. ECB President Mario Draghi will be speaking at Jackson Hole but expectations for him to put forth a tapering plan have severely diminished following the recent ECB minutes. Mr. Draghi is expected to reiterate his recent dovish commentary at the event.
  • The pound has broken below the 100-sma (1.2866) to slip to 1.2830. Sterling has been under pressure since hitting a multi-month high of 1.3269 on August 3. On Tuesday the U.K. will release its latest report on public finances.
  • The yen rallied to 108.60 in early trade as risk off dominated activity. But yen has pulled back to the 109.20 area on reports that Trump Adviser Steve Bannon could leave the White House.

10-Yr: -01/32… EUR/USD: 1.1733… USD/JPY: 109.17…

10:20AM ET

Econ Recon

  • U.S. Treasuries hit session highs ahead of the release of a better than expected preliminary University of Michigan Consumer Sentiment Index for August, but some backtracking has followed in the wake of the report. Despite the recent slippage, Treasuries continue holding modest gains. The post-data downtick in fixed income coincided with a rebound in the stock market, which has helped the S&P 500 narrow its early loss to just 0.1%. The Dollar Index is down 0.3% at 93.41, hovering not far above its overnight low.
  • Yield Check:
    • 2-yr: UNCH at 1.30%
    • 5-yr: -1 bp to 1.74%
    • 10-yr: -1 bp to 2.18%
    • 30-yr: -1 bp to 2.77%


The Preliminary reading of the University of Michigan consumer sentiment for August increased to 97.6 (Briefing.com consensus 94.0) from July's final reading of 93.4.

The key takeaway from the report is that the August increase was fueled by a rebound in the Expectations Index, which returned near its high from the start of 2017.

  • The Current Economic Conditions Index declined from 113.4 in July to 111.0 in August
  • The Index of Consumer Expectations rose from 80.5 in July to 89.0 in August, approaching its January 2017 peak of 90.3
  • The report noted that too few interviews were conducted after the events in Charlottesville, suggesting an increased likelihood of a pullback in the Expectations index when the final August report is released
  • Data captured in the report indicate an annual gain of 2.4% in personal consumption expenditures, unchanged from the final July report

10-Yr: +3/32… EUR/USD: 1.1745… USD/JPY: 108.82…

09:03AM ET

Sense of Caution Persists

  • U.S. Treasuries continue hovering near their recent levels. The 10-yr note sports a slim gain while the 5-yr note sits on its session high. Meanwhile, the 2-yr note has not moved much since overnight action. It is worth pointing out that the Japanese yen has been climbing against the dollar this morning, pressuring USD/JPY near its low from last week (108.74). If the currency pair dips below that mark, the move could lead to risk-off flows in other markets.
  • Yield Check:
    • 2-yr: UNCH at 1.30%
    • 5-yr: -1 bp to 1.74%
    • 10-yr: -1 bp to 2.18%
    • 30-yr: -1 bp to 2.77%

10-Yr: +1/32… EUR/USD: 1.1747… USD/JPY: 108.86…

08:15AM ET

Core Issues Push Higher

  • Core European debt has received some buying interest today while Italian issues are modestly lower. Yesterday's terrorist attacks in Barcelona, which claimed 15 lives and caused more than 100 injuries, have cast a pall over investor sentiment. European Central Bank President Mario Draghi is scheduled to speak at Kansas City Fed's Economic Symposium in Jackson Hole, Wyoming on August 25 at 15:00 ET. Fed Chair Janet Yellen is also scheduled to speak on August 25, at 10:00 ET.
  • European Economic Data:
    • Eurozone June Current Account surplus EUR21.20 billion (last EUR30.50 billion)
    • Germany's July PPI +0.2% month-over-month (expected 0.1%; last 0.0%); +2.3% year-over-year (consensus 2.2%; last 2.4%)
  • Yield Check:
    • France, 10-yr OAT: -2 bps to 0.71%
    • Germany, 10-yr bund: -2 bps to 0.41%
    • Greece, 10-yr note: -1 bp to 5.56%
    • Italy, 10-yr BTP: +2 bps to 2.02%
    • Portugal, 10-yr PGB: -1 bp to 2.74%
    • Spain, 10-yr ODE: -1 bp to 1.43%
    • U.K., 10-yr gilt: -2 bps to 1.08%

10-Yr: UNCH… EUR/USD: 1.1739… USD/JPY: 109.04…

07:44AM ET

Little Changed

  • After spiking on Thursday, U.S. Treasuries are little changed this morning. Some light selling has taken place in shorter-dated issues while the 10-yr note sits just above yesterday's closing level. The overnight session was underscored by caution as equities in Asia retreated while European markets have also faced selling pressure, which has boosted core European debt. Chinese Academy of International Trade and Economic Cooperation researcher Bai Ming was quoted in People's Daily as saying the U.S. probe into an alleged violation of intellectual property rights by China is short-sighted and would harm economic and trade relations.
  • Yield Check:
    • 2-yr: UNCH at 1.30%
    • 5-yr: UNCH at 1.75%
    • 10-yr: -1 bp to 2.19%
    • 30-yr: UNCH at 2.78%
  • News:
    • China's July House Prices +9.7% year-over-year (last 10.2%). The report showed a month-over-month increase in 56 out of 70 cities while prices in all 70 cities showed year-over-year increases.
    • Eurozone June Current Account surplus EUR21.20 billion (last EUR30.50 billion).
  • Data out Today:
    • Preliminary Michigan Sentiment Index for August (Briefing.com consensus 94.0) at 10:00 ET
  • Fed Speakers:
    • FOMC voter Robert Kaplan at 10:15 ET

10-Yr: -1/32… EUR/USD: 1.1743… USD/JPY: 109.09…

03:42PM ET

Market Extends Wednesday Gains

  • U.S. Treasuries ended Thursday on their high, leaving yields just a couple basis points above last week's lows. The day began with modest losses, but buying interest appeared at the cash open, and continued throughout the day. A late-morning spike in Treasuries and an inverse move in equities took place amid rumors suggesting National Economic Council Director Gary Cohn had resigned. The rumor was refuted by Axios shortly after making the rounds and the White House also offered a denial, but the Treasury market continued its advance after a short-lived dip. Stocks, meanwhile, continued retreating into the afternoon while the Dollar Index (93.52, +0.11) slipped from its high, but maintained its gain. The response across capital markets suggests that investors are growing impatient with an administration that made lofty promises, but has not made much headway on highly-anticipated items like tax or health insurance reform. The S&P 500 is down 1.3% with 20 minutes remaining in the session.
  • Yield Check:
    • 2-yr: -3 bps to 1.30%
    • 5-yr: -3 bps to 1.75%
    • 10-yr: -3 bps to 2.20%
    • 30-yr: -3 bps to 2.78%
  • News:
    • Initial claims for the week ending August 12 decreased by 12,000 to 232,000 (Briefing.com consensus 240K) while continuing claims for the week ending August 5 decreased by 3,000 to 1.953 million from last week's revised rate of 1.956 million (from 1.951 million)
      • There are no new takeaways from those data series, which continue reflecting a tight labor market.
    • The Philadelphia Fed Index dipped to 18.9 in August (Briefing.com consensus 17) from 19.5 in July. The August dip leaves the index near levels from the end of last year.
      • The key takeaway from the report is that it showed a rebound in new orders after July figures hinted at a weak start to the third quarter.
    • Industrial Production increased 0.2% in July (Briefing.com consensus 0.3%) while the capacity utilization rate hit 76.7%, remaining unchanged from the revised June rate (revised from 76.6%).
      • The key takeaway from the report is that factory output in July remained at levels seen in February. The lack of significant change in capacity utilization suggests that the resource slack will persist, tempering inflation expectations.
    • The Conference Board's Leading Economic Index increased 0.3% in July (Briefing.com consensus 0.3%), following an unrevised 0.6% increase in June and a 0.3% increase in May.
      • The key takeaway from the report is that a decline in building permits made for the lone blip in an otherwise solid report.
  • Commodities:
    • WTI crude: +0.6% to $47.08/bbl
    • Gold: +0.7% to $1292.30/ozt
    • Copper: -0.3% to $2.94/lb
  • Currencies:
    • EUR/USD: -0.3% to 1.1737
    • USD/JPY: -0.4% to 109.63
  • Data out Friday:
    • Preliminary Michigan Sentiment Index for August (Briefing.com consensus 94.0) at 10:00 ET

10-Yr: +11/32… EUR/USD: 1.1741… USD/JPY: 109.50…

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