The Market at 03:27PM ET
Moving the Market
Pending Home Sales: Actual -1.1%, consensus -0.8%, prior 6.1% (revised 6.0%)
Treasury will auction $29B 2y notes
Treasuries Slip Amid Quiet Trade:
- Treasuries booked small losses, finishing near their lows.
- The complex held small losses into the cash open before rallying into this morning's disappointing pending home sales (-1.1% actual v. -0.8% expected) data.
- Maturities put in their highs in the moments following the miss, and slipped over the remainder of the session as equities recovered their early losses.
- This afternoon's $29 bln 2y note auction raised eyebrows as it drew 0.544%, the highest since May 2011. The auction saw a slightly less than average 3.22x bid/cover, and was supported by the 26.9% indirect takedown. Primary dealers were left with a whopping 58.8% of the supply.
- Post-auction selling put in the session lows before ticking higher into the cash close.
- Today's weakness had the biggest impact on the belly as the 5y added +2.7bps to 1.703%. The yield closed at its highest level in three weeks, and is now just a handful of bps below the important 1.750% level.
- The 10y tacked on +2.2bps to 2.491%. Action over much of the past week has held in a tight range (2.450%/2.520%) as resistance at the level holds.
- At the long end, the 30y ticked up +1.8bps to 3.262%. Today's selling ran action off Friday's 13-month closing low.
- A slightly steeper curve won out as the 2-10-yr spread widened to 199.5bps.
- Precious metals were little changed with gold and silver @ $1305 and $20.63, respectively.
- Data: Case-Shiller 20-city Index (9) and consumer confidence (10).
- Auction: $35 bln 5y notes.
Dollar Drifts Little Changed:
- The Dollar Index drifts little changed near 81.00.
- An extremely quiet session has seen action trapped in a less than 5 cent range for U.S. trade.
- EURUSD is +5 pips @ 1.3440 as trade stabilizes near eight-month lows. A lackluster session has seen action limited to just 15 pips.
- GBPUSD is +15 pips @ 1.6990 as buyers take charge for the first time in nine sessions. Sterling has found support in the 1.6950/1.7000 area as buyers emerge in defense of the 50 dma. Britain's net lending to individuals will cross the wires tomorrow.
- USDCHF is -10 pips @ .9035 as trade slips off its best levels since the beginning of February. Today's sleepy trade is a result of the lackluster session for the euro.
- USDJPY is +5 pips @ 101.85 as buyers fight to put in a seventh day of gains. Today's advance has the pair probing resistance in the 101.80 area that is guarded by the 50 dma. Additional resistance near 102.00 is also home to the 100 and 200 dma. Japan's household spending and retail sales figures are due out tonight.
- AUDUSD is +15 pips @ .9410 after holding minor support near .9400. The .9350 level is home to more important support that is helped by the 50 dma.
- USDCAD is -10 pips @ 1.0805 as action stalls at five-week highs. Many participants are watching 1.0800/1.0820 resistance as the 200 dma also lurks in the vicinity.
- Treasuries hold near session lows following the in-line $29 bln 2y note auction.
- The auction drew 0.544%, the highest since May 2011, and a slightly less than average 3.22x bid/cover. Indirect bidders (26.9%) provided support as direct bids (14.3%) were light.
- Light selling has yields up almost +3bps in the belly as the 5y holds @ 1.703% and is on track to close at a three-week high.
- The 10y trades +1.8bps @ 2.487%, and continues to flirt with resistance in the 2.500% region.
- At the long end, the 30y is +1.2bps @ 3.256%. Today's light selling has the yield ticking off 13-month lows.
- A flatter curve persists as the 2-10-yr spread trades 198.5bps.
- Precious metals are little changed with gold and silver @ $1303 and $20.58, respectively.
Auction Up: $29 bln 2y note auction draws 0.544%, 3.22x bid/cover, 26.9% indirect bidders, 14.3% direct bidders
Treasuries are seeing little reaction to the in-line auction.
$29B 2y Note Auction Preview:
- Previous auction drew 0.511%, 3.23x bid/cover, 23.1% indirect bidders, 23.3% direct bidders
- 12-auction averages: 0.381%, 3.35x bid/cover, 26.3% indirect bidders, 23.6% direct bidders
Markets Await FOMC, Jobs, European Inflation Data this Week: The Dollar Index is battling resistance at the 81.00 level as markets prepare for a busy week. Friday will be one of the busiest days on record for economic data with jobs, ISM, PCE Prices, personal income & spending and vehicle sales all due. The FOMC will hold a two-day meeting with a statement coming on Wednesday, but this is expected to be a relative non-event with another $10 bln taper. The release of the minutes in late August will garner greater interest for participants. This morning, new home sales fell short of expectations while a preliminary look at Services PMI was in-line.
- The euro has held the 1.3420 level and is working its way back higher as the dollar battles 81.00. Inflation data will be a key theme for the markets this week starting on Wednesday with Spain and Germany. Friday morning, we will see revisions to PMI data that so far has outpaced expectations.
- The pound is hovering below the 1.7000 level. Sterling has given up some of its recent gains after economic data saw a slowdown from its recent recovery. This has led to some questions on how quickly the Bank of England will react. But, sterling has not wandered too far away from the key level as it trades in the 1.6990 area.
- The yen has been unable to take advantage of the weak equity markets as it remains in the low end of the 101 area. Yen remains in a tight range as a slew of key moving averages (20 sma 102.11, 50 sma 1020.05, 100 sma 102.04, 200 sma 101.79) hold in the vicinity.
- Treasuries linger near their best levels of the session following the pending home sales (-1.1% actual v. -0.8% expected) miss.
- A small bid at the long end has the 30y -0.5bps @ 3.239% as action presses to a fresh 13-month low.
- The 10y trades +0.5bps @ 2.474% as trade contends with the late-May lows.
- In the belly, the 5y is +1.2bps @ 1.688%.
- A flatter curve has taken hold as the 2-10-yr spread trades 198bps.
- Precious metals remain bid with gold +$1 @ $1304 and silver +$0.06 @ $20.70.
- Attention now turns to this afternoon's $29 bln 2y note auction.
- Yields are flat to lower across Europe as significant outperformance can be seen in the periphery.
- A quiet economic calendar has made for a sleepy trade across most of the region.
- German Bunds are ticking higher amid a quiet session. Light buying has the 10y -1bp @ 1.145% as action flirts with lifetime lows.
- UK Gilts are slipping during a lackluster trade. The 10y holds +1bp @ 2.580% as action continues to test support in the area.
- French OATs are bid. A -1bp drop has the 10y @ 1.545%.
- Italian BTPs are seeing solid gains following today's solid zero-coupon note auction. The country unloaded EUR3.25 bln in paper, drawing a record low 0.428% and a 2.00x bid/cover. The 10y holds -3bps @ 2.590%, an all-time low.
- Spanish Bonos are seeing a modest bid pressure yields lower by as much as -4bps. The 10y has slipped below the 2.500% threshold for the first time ever.
Dollar Trades Flat:
- The Dollar Index trades flat near 81.00.
- A quiet overnight session has seen in the Index locked in a less than 10 cent range as global news and data was absent.
- EURUSD trades +5 pips @ 1.3440 as action ticks off levels last seen in November. The single currency has been unable to generate a bid for much of the last two weeks as its last real bid came in the middle of July.
- GBPUSD is +10 pips @ 1.6985 as action checks up on the 50 dma. The early bid has sterling higher for the first time in nine sessions as support near 1.6950/1.7000 holds.
- USDCHF is -10 pips @ .9040 as trade slips off almost six-month highs. The light selling comes in response to the small uptick in the euro.
- USDJPY is flat @ 101.85 as trade looks for a seventh day of gains. Action over the past couple of sessions has been unable to punch through the 101.80 pivot that dates back to the beginning of February and is guarded by the 50 dma. Both the 100 and 20 dma provide additional resistance near 102.00.
- AUDUSD is +10 pips @ .9405 as buyers look to regain control after two days of selling. A quiet trade has seen action locked in a tight 20 pip range.
- USDCAD is -10 pips @ 1.0805 as action takes a breather near five-week highs. Resistance at 1.0800 is guarded by the 200 dma.
Yields Edge Up:
- Light selling has Treasuries slipping into the cash open.
- Overnight action saw its usual 3bp range.
- Up front, the 2y holds +0.4bps @ 0.496% as trade continues to test resistance near 0.500%.
- In the belly, the 5y is +1.5bps @ 1.691%. Early selling has the yield contending with near three-week highs as support provided by the 50 and 100 dma near 1.650% holds.
- The 10y trades +1.6bps @ 2.485%. Many traders remain focused on resistance in the 2.500%/2.525% region.
- At the long end, the 30y is +0.9bps @ 3.253%. Light selling has the yield ticking off 13-month lows.
- A slightly steeper curve has developed as the 2-10-yr spread trades wider @ 199bps.
- Precious metals are little changed with gold +$1 @ $1304 and silver +$0.02 @ $20.66.
- Data: pending home sales (10).
- Auction: $29 bln 2y notes.
The Week in Review: 30y Drops to 3.244%, 13-Month Low
The Week Ahead
- Treasuries finished the week mixed as selling took place up front while buyers were in control of longer dated maturities.
- A quiet economic calendar saw mixed results as existing home sales (5.04 mln actual v. 5.00 mln expected) and durable orders (0.7% actual v. 0.3% expected) beat and new home sales (406K actual v. 475K expected) missed.
- CPI posted an in-line 0.3% print.
- Treasury held an in-line $15 bln 10y TIPs auction. The auction drew 0.249% and a 2.49x bid/cover. Indirect bidders took down 53.1% of the supply while direct bidders bought 10.3%.
- Buying at the long end dropped the 30y -4bps to 3.244%. The yield ended the week at its lowest level in 13 months as action now tests support in the 3.200%3.250% area.
- The 10y shed -1bps to 2.469% as trade settled near its lowest levels since the end of May. Traders will have their eye on the 2.440% level into next week as a flush below there would produce the lowest close since June 2013, and put 2.200%/2.250% support on the radar.
- In the belly, the 5y tacked on +3bps to 1.676%. Action tested support in the 1.650% area that is guarded by the 50 and 100 dma early in the week, but was unable to penetrate the level.
- Up front, the 2y climbed +4bps to 0.484%. The 0.500% region will be in focus in the days ahead as a punch through there puts the September 2013 highs in play.
- A flatter curve won out as the 2-10-yr spread tightened to 198.5bps and the 5-30-yr spread narrowed to 157bps.
- Monday's data is limited to pending home sales (10). Treasury will auction $29 bln 2y notes.
- Tuesday will see Case-Shiller 20-city Index (9) and consumer confidence (10). Treasury will hold a $35 bln 5y note auction.
- Data picks up on Wednesday with the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), GDP-Adv. (8:30), and the FOMC rate decision (14). Treasury will auction $29 bln 7y notes.
- Data continues to flow on Thursday with Challenger Job Cuts (7:30), initial and continuing claims, Employment Cost Index (8:30), and Chicago PMI (9:45).
- Friday's data is the most anticipated of the week as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, personal income and spending, PCE prices- core (8:30), Michigan Sentiment - Final (9:55), ISM Index, construction spending (10), auto/truck sales (14) are due out.
Dollar Crosses 81.00:
- The Dollar Index drifts near session highs as trade fights for its first close above the 81.00 level since the beginning of February.
- Today's bid has the Index higher for the tenth time in twelve sessions, and has trade nearing the key 81.40 area.
- EURUSD is -30 pips @ 1.3430 as action contends with its lowest close since Veterans' Day. Weighing on the euro was today's disappointing German Ifo Business Climate survey, and reports European governments are considering further sanctions against Russia. Support near 1.3400 looms large.
- GBPUSD is -15 pips @ 1.6970 as trade presses lower for an eighth day. The losing streak has shaved off approximately 175 pips, and has trade testing support in the 1.6950/1.7000 area that is helped by the 50 dma.
- USDCHF is +20 pips @ .9045 as trade readies for its best close in almost six months. The .9100 area is setting up as a key level, but action will remain closely correlated to the euro.
- USDJPY is -5 pips @ 101.75 after surrendering its early gains. The pair threatened the 102.00 mark in response to this morning's CPI data, but has seen steady selling over the course of the U.S. session as the bears stepped in at the convergence of the 50, 100, and 200 dma. On the downside, the 101.00/101.25 area remains key.
- AUDUSD is -20 pips @ .9395 as selling takes hold for a second day. Support near .9350 remains in focus as the 50 dma also lurks in the vicinity.
- USDCAD is +70 pips @ 1.0815 as trade surges to its best level since the middle of June. Today's bid has run the pair above its 50 dma, and has action testing resistance guarded by the 200 dma.