Updated: 06-25-2019

The Market at 11:30AM ET
10-Year: +9/32…1.988…
EUR/USD: 1.1383…
USD/JPY: 106.96…

Moving the Market

-- Treasuries approach last week's highs

-- 9:00 ET: April S&P Case-Shiller Home Price Index (actual 2.5%; Briefing.com consensus 2.5%; prior 2.6%) and April FHFA Housing Price Index (actual 0.4%; Briefing.com consensus 0.2%; prior 0.1%)

-- 10:00 ET: June Consumer Confidence (actual 121.5; Briefing.com consensus 132.0; prior 131.3) and May New Home Sales (actual 626,000; Briefing.com consensus 683,000; prior 679,000)

-- 13:00 ET: $40 bln 2-yr Treasury note auction results

-- 13:00 ET: Chairman Jay Powell to speak at the Council for Foreign Relations

11:30AM ET

Treasury Auction Preview

  • $40 bln 2-year Treasury note auction (results at 13:00 ET)
    • Prior auction results:
      • High yield: 2.125%
      • Bid-to-cover: 2.75
      • Indirect bid: 46.6%
      • Direct bid: 27.2%
    • Average results of previous 12 auctions:
      • High yield: 2.572%
      • Bid-to-cover: 2.63
      • Indirect bid: 46.3%
      • Direct bid: 15.6%

10-Yr: +9/32… EUR/USD: 1.1383… USD/JPY: 106.96…

10:31AM ET

Data Recon

  • New home sales declined 7.8% m/m in May to a seasonally adjusted annual rate of 626,000 (Briefing.com consensus 683,000) from an upwardly revised 679,000 (from 673,000) in April.
  • The key takeaway from the report is that demand was relatively soft despite a drop in mortgage rates and a 2.8% yr/yr decline in the median sales price of $308,000.
    • Weak sales activity in the West region was a major swing factor for the disappointing results. Sales there were down 35.9% m/m. They were down 17.6% in the Northeast and up 6.3% and 4.9%, respectively, in the Midwest and South regions.
    • The inventory of new homes for sale increased to a 6.4-month supply from a 5.9- month supply in April.
    • Homes priced at $399,999 or less accounted for 70% of new homes sold, unchanged from a year ago, and versus 66% in April.
  • The Conference Board's Consumer Confidence Index fell to 121.5 in June (Briefing.com consensus 132.0) from a downwardly revised 131.3 (from 134.1) in May. The index is at its lowest level since September 2017.
  • The key takeaway from the report is that it reflects growing concern about trade tensions among consumers that had been previously lacking, but which had been showing up in business confidence surveys. Flagging confidence on the part of businesses and consumers alike, if it is sustained, is an adverse development for the growth outlook.
    • The Present Situation Index dropped from 170.1 to 162.6.
    • The Expectations Index decreased from 105.0 to 94.1.
  • Yield check:
    • 2-yr: -3 bps to 1.71%
    • 3-yr: -4 bps to 1.65%
    • 5-yr: -4 bps to 1.72%
    • 10-yr: -3 bps to 1.99%
    • 30-yr: -2 bps to 2.53%

10-Yr: +7/32… EUR/USD: 1.1395… USD/JPY: 106.89…

10:09AM ET

Gains Extended

  • U.S. Treasuries have built on their early gains, putting longer tenors just shy of last week's highs. Treasuries set fresh session highs in recent trade, responding to the release of two weaker than expected economic reports. New Home Sales hit at a seasonally adjusted annualized rate of 626,000 in May (Briefing.com consensus 683,000) while Consumer Confidence decreased to 121.5 in June (Briefing.com consensus 132.0) from a revised 131.3 in May.
  • Yield Check:
    • 2-yr: -3 bps to 1.71%
    • 3-yr: -4 bps to 1.69%
    • 5-yr: -4 bps to 1.72%
    • 10-yr: -3 bps to 1.99%
    • 30-yr: -2 bps to 2.53%

10-Yr: +7/32… EUR/USD: 1.1394… USD/JPY: 106.89…

08:07AM ET

Longer Tenors Tick Higher

  • U.S. Treasuries are on track to begin the Tuesday session near yesterday's closing levels. Treasury futures stayed on an upward path during the overnight session, but the market found resistance near highs from Friday. The ensuing pullback ran into support near levels from yesterday, leaving Treasuries with modest gains at this juncture. Yesterday's session was quiet, but today, the market will receive some housing and consumer confidence data while the U.S. Treasury will sell $40 bln in 2-yr notes. Fed Chairman Jay Powell will speak in the early afternoon. The U.S. Dollar Index is up 0.1% at 96.05, seeking its first advance in five days.
  • Yield Check:
    • 2-yr: UNCH at 1.74%
    • 3-yr: UNCH at 1.69%
    • 5-yr: UNCH at 1.75%
    • 10-yr: -1 bp to 2.01%
    • 30-yr: -1 bp to 2.54%
  • News:
    • Chinese press reported that local government bond issuance could hit a record high in June due to continued stimulus.
    • Yonhap reported that South Korea's Finance Ministry asked major banks to increase lending to small and medium companies.
    • South Korea's Consumer Confidence decreased to 97.5 in June from 97.9, hitting a five-month low.
    • Hong Kong's May trade deficit totaled HKD34.70 bln (last deficit of HKD35.10 bln). Imports decreased 4.3% m/m (last -5.5%) while exports fell 2.4% m/m (last -2.6%)
    • The new British Prime Minister will be announced on July 23.
    • France's June Business Survey decreased to 102 (expected 104) from 104.
    • Italy's Deputy Prime Minister Luigi Di Maio said that the current coalition government will serve its full term and continue for four more years.
    • European Central Bank Vice President Luis de Guindos said that the effects of negative rates must be watched closely, and that falling growth expectations could weaken the banking sector.
  • Commodities:
    • WTI Crude: -0.4% to $57.68/bbl
    • Gold: +1.0% to $1431.90/ozt
    • Copper: +0.9% to $2.73/lb
  • Currencies:
    • EUR/USD: -0.1% to 1.1385
    • GBP/USD: -0.1% to 1.2728
    • USD/CNH: +0.1% to 6.8783
    • USD/JPY: -0.2% to 107.11
  • Data out Today:
    • 9:00 ET: April S&P Case-Shiller Home Price Index (Briefing.com consensus 2.5%; prior 2.7%) and April FHFA Housing Price Index (Briefing.com consensus 0.2%; prior 0.1%)
    • 10:00 ET: June Consumer Confidence (Briefing.com consensus 132.0; prior 134.1) and May New Home Sales (Briefing.com consensus 683,000; prior 673,000)
  • Treasury Auctions:
    • 13:00 ET: $40 bln 2-yr Treasury note auction results
  • Fed Speakers:
    • 8:45 ET: New York Fed President (FOMC voter) John Williams
    • 12:00 ET: Atlanta Fed President (non-voter) Raphael Bostic
    • 13:00 ET: Chairman (FOMC voter) Jay Powell

10-Yr: +2/32… EUR/USD: 1.1385… USD/JPY: 107.11…

03:05PM ET

Week Begins on Higher Note

  • U.S. Treasuries began the week on a higher note, with shorter tenors leading the way. Treasury futures followed Friday's retreat with a swift rebound that began taking shape during a quiet overnight session. There was some focus on the upcoming G-20 summit in Osaka, where preparations are being made for a meeting between President Trump and China's President Xi Jinping, according to China's assistant foreign minister. Treasury futures extended their overnight gains during the European session in response to the release of another weak economic report from Germany. The ifo Business Climate Index decreased to 97.4 from 97.9 in June with the Manufacturing sub-index falling (to 1.5 from 3.9) for the eleventh time over the past twelve months. Treasuries started the cash session on a higher note, but early trade saw some mild backtracking. The selling pressure abated two hours into the session, allowing Treasuries to set session highs above their opening levels. The 5-yr note and the 10-yr note remained just above their starting levels into the afternoon while the long bond lagged, settling closer to its low. The U.S. Dollar Index slid 0.3% to 95.98, recording its fourth consecutive decline. The Index is now just above its low from March (95.74).
  • Yield Check:
    • 2-yr: -4 bps to 1.74%
    • 3-yr: -5 bps to 1.69%
    • 5-yr: -5 bps to 1.75%
    • 10-yr: -5 bps to 2.02%
    • 30-yr: -4 bps to 2.55%
  • News:
    • The Trump administration will impose sanctions on the office of Iran's Supreme Leader Ayatollah Ali Khamenei
    • China's Assistant Foreign Minister Zhang Jun said that China will not allow attendees of the upcoming G-20 summit to discuss the recent unrest in Hong Kong, calling the situation an internal affair.
    • China's Vice Commerce Minister Wang Shouwen said that negotiators from China and the United States are having discussions and that both sides should make compromises in order to reach a deal.
    • Japan's April Leading Index increased to 95.9 (expected 95.5) from 95.7.
    • Germany's June ifo Business Climate Index decreased to 97.4 from 97.9, as expected. June Current Assessment ticked up to 100.8 (expected 100.3) from 100.6 while the Business Expectations Index decreased to 94.2 (expected 94.6) from 95.2.
  • Commodities:
    • WTI crude: +0.8% to $57.82/bbl
    • Gold: +1.3% to $1418.15/ozt
    • Copper: +0.4% to $2.71/lb
  • Currencies:
    • EUR/USD: +0.3% to 1.1399
    • GBP/USD: UNCH at 1.2741
    • USD/CNH: +0.2% to 6.8725
    • USD/JPY: UNCH at 107.33
  • The Day Ahead:
    • 9:00 ET: April S&P Case-Shiller Home Price Index (Briefing.com consensus 2.5%; prior 2.7%) and April FHFA Housing Price Index (Briefing.com consensus 0.2%; prior 0.1%)
    • 10:00 ET: June Consumer Confidence (Briefing.com consensus 132.0; prior 134.1) and May New Home Sales (Briefing.com consensus 683,000; prior 673,000)
  • Treasury Auctions:
    • 13:00 ET: $40 bln 2-yr Treasury note auction results

10-Yr: +13/32… EUR/USD: 1.1399… USD/JPY: 107.33…

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