Updated: 04-28-2017

The Market at 03:18PM ET
10-Year: +5/32…2.28…
EUR/USD: 1.0895…
USD/JPY: 111.45…

Moving the Market

  • Q1 GDP -- Adv.: Actual 0.7%, Briefing.com consensus 1.1%, Prior 2.1%
    • Q1 Chain Deflator -- Adv.: Actual 2.3%, Briefing.com consensus 2.1%, Prior 2.1%
  • Q1 Employment Cost Index: Actual 0.8%, Briefing.com consensus 0.6%, Prior 0.5%
  • April Chicago PMI: Actual 58.3, Briefing.com consensus 56.9, Prior 57.7
  • April Michigan Sentiment -- Final: Actual 97.0, Briefing.com consensus 98.0, Prior 98.0
  • Fed Governor Brainard: Discusses fintech regulation, no comments on monpol or economic outlook
  • Philadelphia Fed President Harker (FOMC voter) (14:30 ET)

03:18PM ET

Treasuries Rally into Month-End Close

  • U.S. Treasuries rallied into today's close in a curve-flattening move after trading mostly unchanged for most of the session. The first official estimate of U.S. Q1 GDP growth was released this morning and missed expectations (0.7% vs. Briefing.com consensus 1.1%), weighed down by weak personal consumption growth. The Employment Cost Index rose more than expected in the first quarter and the Chicago PMI showed manufacturing activity accelerating. The S&P 500 is down 0.17% to 2,384.8 and the U.S. Dollar Index is down 0.06% to 99.02. Next week will be heavy on economic data flow, culminating in the April jobs report on Friday
  • Yield Check:
    • 2-yr: +1 bp to 1.27%
    • 5-yr: -1 bp to 1.92%
    • 10-yr: -1 bp to 2.28%
    • 30-yr: -1 bp to 2.95%
  • News:
    • U.S. gross domestic product grew by 0.7% q/q in the first quarter, according to preliminary data. The Briefing.com consensus was 1.1% and the prior reading was 2.1%
      • The key takeaway was that personal consumption expenditures (PCE) growth was decidedly weak, increasing just 0.3%, the weakest in more than seven years
    • The Chain Deflator rose 2.2% q/q in the first quarter, faster than expected after 2.1% growth in Q4
    • The Employment Cost Index rose by 0.8% q/q in the first quarter, exceeding expectations after 0.5% growth in Q4
      • The key takeaway from the report is that compensation costs are moving higher, which will create some profit margin constraints while at the same time lending employees some increased spending power
    • The MNI Chicago Business Barometer increased to 58.3 in April (Briefing.com consensus 56.9) from 57.7 in March, exceeding expectations and hitting its highest level since January 2015
      • The New Orders Index rose from 60.4 to 65.9
      • The Production Index slipped from 61.7 to 59.5
      • The Employment Index moved up from 49.1 to 53.9
      • The Prices Paid Index softened from 64.7 to 62.9
    • The Michigan Sentiment Index was revised down to 97.0 for April from the initial estimate of 98.0. March's reading was 96.9
      • The Current Conditions measure was revised down to 112.7 from 115.2
      • The Expectations gauge was revised up to 87.0 from 86.9
  • Commodities:
    • WTI crude: +0.35% to $49.14/bbl.
    • Gold: +0.21% to $1,268.5/troy oz.
    • Copper: +0.52% to $2.6065/lb.
  • Currencies:
    • EUR/USD: +0.20% to 1.0895
    • USD/JPY: +0.17% to 111.45
  • Week Ahead:
    • Monday: March Personal Income and Spending (08:30 ET); March PCE Prices and PCE Prices -- Core (08:30 ET); March Construction Spending (10:00 ET); April ISM Manufacturing (10:00 ET)
    • Tuesday: April Auto and Truck Sales (14:00 ET)
    • Wednesday: MBA Mortgage Index for the week ending 4/29 (07:00 ET); April ADP Employment Change (08:15 ET); April ISM Services (10:00 ET); Crude Inventories for the week ending 4/29 (10:30 ET); May FOMC Rate Decision (14:00 ET)
    • Thursday: April Challenger Job Cuts (07:30 ET); Initial Jobless Claims for the week ending 4/29 and Continuing Jobless Claims for the week ending 4/22 (08:30 ET); March Trade Balance (08:30 ET); Q1 Productivity and Unit Labor Costs (08:30 ET); March Factory Orders (10:00 ET); Natural Gas Inventories for the week ending 4/29 (10:30 ET)
    • Friday: April Employment Situation Report (08:30 ET); Fed Vice Chair Fischer (11:30 ET); San Francisco Fed President Williams (non-FOMC voter) (12:45 ET); Fed Chair Yellen (13:30 ET); St. Louis Fed President Bullard (non-FOMC voter) (13:30 ET); Chicago Fed President Evans (FOMC voter) (13:30 ET); Boston Fed President Eric Rosengren (non-FOMC voter) (13:30 ET); March Consumer Credit (15:00 ET)

10-Yr: +5/32… EUR/USD: 1.0895… USD/JPY: 111.45…

02:21PM ET

Sterling Jumps to Six-Month High

  • The U.S. Dollar Index lost 0.09% to 98.99 today. The British pound was the best-performing major, defying a weaker-than-expected GDP growth number for the first quarter. The kiwi dollar is within an easy day's trade of a 10-month low but the Aussie bounced from a three-month low. The Japanese yen continued to lack for buying interest as global equity indices remained near recent multi-month highs. The Canadian dollar made a fresh 52-week low as oil prices gave back early gains. The euro continues to hold near a five-month high but has so far struggled to get back into its range from last spring/summer (above $1.0953)
  • EUR/USD: +0.24% to 1.0899
    • The eurozone's consumer price index rose 1.9% y/y in April, beating estimates after 1.5% inflation in March
      • The core CPI was up 1.2% y/y in April (0.7% prior)
  • GBP/USD: +0.46% to 1.2963
    • The U.K.'s GDP was up 0.3% q/q in the first quarter (2.1% y/y), missing estimates after 0.7% growth in Q4
    • In the U.K., GfK Consumer Confidence fell to -7 from -6, as expected
    • The Nationwide House Price Index fell by 0.4% m/m in April (+2.6% y/y), missing expectations after a 0.3% decline in March
  • USD/CHF: -0.02% to 0.9938
    • In Switzerland, KOF Leading Indicators unexpectedly fell to 106.0 in April from 107.2 in March
  • USD/JPY: +0.12% to 111.39
    • In Japan, household spending fell by 2.0% m/m in March (-1.3% y/y), missing estimates after a 2.5% increase in February
    • Industrial production declined by 2.1% m/m in March, missing forecasts after a 3.2% jump in February
    • Retail sales were up 2.1% y/y in March, beating estimates after a 0.1% increase in February
    • Japan's National Consumer Price Index rose by 0.2% y/y in March, missing expectations after 0.3% growth in February
      • Japan's National Core CPI was up 0.2% y/y in March, also missing expectations after 0.2% growth in February
    • The Tokyo Core CPI fell by 0.1% y/y in April, beating estimates for a sharper decline after a 0.4% slide in March
      • The Tokyo CPI fell by 0.1% y/y in April, also beating estimates after a 0.4% drop in March
    • Japan's unemployment rate remained at 2.8% in March. Economists had expected an uptick
    • Construction orders rose by 1.1% y/y in March (5.7% prior)
    • Housing starts increased by 0.2% y/y in March (-2.6% prior)
  • USD/CNY: -0.05% to 6.894
  • USD/RUB: -0.19% to 56.89
  • USD/TRY: -0.35% to 3.553
  • USD/BRL: -0.10% to 3.180
  • USD/MXN: -0.87% to 18.86 
  • USD/CAD: +0.20% to 1.3662
    • Canada's GDP was unchanged m/m in February, barely missing forecasts after 0.6% growth in January
    • The Raw Materials Price Index fell by 1.6% m/m in March (+16.6% y/y) after a 1.3% gain in February
  • AUD/USD: +0.27% to 0.7485
    • Australia's producer price index rose 0.5% q/q in the first quarter of 2017 (1.3% y/y), beating estimates and matching Q4 2016's pace
    • Australia's Private Sector Credit grew by 0.3% m/m in March, missing forecasts for improvement from February's 0.3% pace
  • NZD/USD: -0.08% to 0.6873
    • New Zealand's ANZ Business Confidence Index fell to 11.0 in April from 11.3 in March
    • Building consents fell by 1.8% m/m in March after a 17.2% jump in February
    • New Zealand's trade balance improved less than expected to a surplus of NZD332 mln in March from a deficit of NZD50 mln in February

10-Yr: +1/32… EUR/USD: 1.0899… USD/JPY: 111.39…

01:41PM ET

Stocks Hover Above Lows

  • U.S. Treasuries are still near their unchanged marks today as the S&P 500 has fallen 0.19% to 2,384.2. The U.S. Dollar Index is losing 0.10% at 98.97 as the British pound trades to a six-month high (+0.44% to 1.2960). WTI crude is higher by 0.43% at $49.18/bbl. and gold is up 0.18% at $1,268.2/troy oz.
  • Fed Governor Brainard spoke about fintech regulation at Northwestern University today, but did not comment on monetary policy or the economic outlook
  • This has been a rather busy week for the Treasury market and the action began on Sunday night in electronic trade as French presidential election results showed Macron and Le Pen advancing to the run-off round, set for May 7. U.S. new home sales beating expectations in March, according to data released on Tuesday. On Thursday, there was very strong demand for a $28 bln seven-year Treasury auction and the Bank of Japan reduced its inflation forecast modestly. Also on Thursday, the European Central Bank failed to meet the expectations of some bearish German debt traders by reiterating its extremely dovish forward guidance. On Friday, U.S. Q1 GDP growth missed estimates on weaker consumer spending
  • Yield Check:
    • 2-yr: unch at 1.26%
    • 5-yr: unch at 1.83%
    • 10-yr: unch at 2.30%
    • 30-yr: unch at 2.97%

10-Yr: -1/32… EUR/USD: 1.0907… USD/JPY: 111.46…

12:44PM ET

Q1 GDP Miss- The Dollar Index saw aggressive selling as the European CPI numbers were released, breaking below 99 before finally settling at the 98.70 area. The DXY was able to recover its losses and rallied to 99.12. Making the move all the more impressive was that it came despite a Q1 GDP miss (+0.7% vs +1.1% Briefing.com consensus). The move suggests markets were well prepared to disregard a weak Q1 number given 1) the weak seasonality that has accompanied Q1 since the financial crisis and 2) comments in March from Fed Chair Janet Yellen that GDP tends to be 'noisy'. The DXY is sitting at 99 ahead of next week that will have Jobs, Income and Spending, ISM, and another Fed meeting. The FOMC is not expected to move this time around so it very well may be a non-event.

  • The euro ripped through the 1.09 level when the CPI numbers hit. The single currency has since given up that move and here is why. The headline numbers were certainly eye-catching. But ECB President Mario Draghi had addressed this in his ECB conference yesterday saying that the current inflation numbers could see a move higher but the underlying data suggested that the move would be unsustainable. The majority of European markets are closed on Monday. The key theme for the week will be French polls as it will be a lead up to the second round of elections in France.
  • The pound has edged up out of its recent range and rallied to its best level since October 3. The move comes despite the preliminary look at Q1 GDP coming in below expectations (+0.3% vs +0.4% expectations).
  • The yen has settled into the 111 area over the past sessions. There have been a lot of headlines from Japan the past two days but nothing that has really changed the narrative. The Bank of Japan remained in easing mode. Economic data was mixed to in line and has had little impact with Unemployment and Retail Sales beating, CPI in line, and Industrial Production and Household Spending falling short of expectations.

10-Yr: -03/32… EUR/USD: 1.0895… USD/JPY: 111.44…

12:33PM ET

Treasuries Look to Stocks

  • Treasuries are still a touch lower today as the S&P 500 wavers with a loss of 0.14% at 2,385.5. The U.S. Dollar Index is down 0.01% to 99.06 and gold is adding 0.14% to $1,267.7/troy oz. WTI crude is higher by 0.04% to $48.99/bbl.
  • Yield Check:
    • 2-yr: unch at 1.27%
    • 5-yr: +1 bp to 1.83%
    • 10-yr: unch at 2.30%
    • 30-yr: +1 bp to 2.98%
  • 30-Year Treasury Yield (Daily): The 30-year yield's most obvious resistance is at the downtrend, drawn from the December high (red line). Yield support comes in at the 21-day moving average, currently 2.951%. Pushing above the downtrend and the 50-day moving average (3.018%) would shift our medium-term outlook towards higher yields


10-Yr: -1/32… EUR/USD: 1.0898… USD/JPY: 111.44…

11:46AM ET

Treasuries Wait for Flight-to-Quality Bid

  • Treasuries continue to trade in negative territory today even as the S&P 500 slides 0.22% to 2,383.4. The French run-off election polling continues to run about 60/40 in favor of Emmanuel Macron. There should not be too much uncertainty baked into asset prices at this point, but Jean-Luc Melenchon said today that he won't vote for National Front candidate Marine Le Pen in the second round. 
  • The U.S. Dollar Index is losing 0.03% to 99.04 and WTI crude is down 0.04% to $48.95/bbl.
  • Gold is up 0.23% to $1,268.8/troy oz.
  • The MNI Chicago Business Barometer increased to 58.3 in April (Briefing.com consensus 56.9) from 57.7 in March, exceeding expectations and hitting its highest level since January 2015. The dividing line between expansion and contraction is 50.0
    • The key takeaway from the report is that the New Orders Index moved to an almost three-year high in April, offering an encouraging signal about the economic outlook for the Chicago Fed region
    • The New Orders Index rose from 60.4 to 65.9
    • The Production Index slipped from 61.7 to 59.5
    • The Employment Index moved up from 49.1 to 53.9
    • The Prices Paid Index softened from 64.7 to 62.9
  • For another view on the GDP growth disappointment, Bloomberg attributes some of it to election-related spending
  • Yield Check:
    • 2-yr: +1 bp to 1.27%
    • 5-yr: +1 bp to 1.83%
    • 10-yr: +1 bp to 2.31%
    • 30-yr: +1 bp to 2.98%

10-Yr: -3/32… EUR/USD: 1.0899… USD/JPY: 111.39…

11:15AM ET

Stocks Drift Lower

  • U.S. Treasuries are trading below their unchanged marks today as the S&P 500 loses 0.19% at 2,384.4 and WTI crude is up 0.53% to $49.23/bbl. The U.S. Dollar Index is adding 0.02% at 99.09 and gold is up 0.17% to $1,268.1/troy oz. To recap the session, eurozone CPI growth beat estimates; U.S. GDP growth missed expectations in the first quarter on weak personal consumption; the Employment Cost Index rose more than expected; the Chicago PMI unexpectedly rose; and Michigan Sentiment was revised lower
    • The really important points there are the first two -- eurozone CPI and U.S. GDP growth
  • Yield Check:
    • 2-yr: +1 bp to 1.27%
    • 5-yr: unch at 1.83%
    • 10-yr: +1 bp to 2.31%
    • 30-yr: +1 bp to 2.98%
  • According to the advance estimate from the BEA, first quarter GDP increased at a seasonally adjusted annual rate of 0.7% (Briefing.com consensus +1.1%) while the GDP Price Index increased 2.3% (Briefing.com consensus +2.1%)
    • The main drag on growth in the first quarter was the change in private inventories, which subtracted 0.93 percentage points. A downturn in government spending subtracted 0.30 percentage points
    • The key takeaway from the report, however, was that the growth in personal consumption expenditures (PCE) was decidedly weak, increasing just 0.3%, which was the weakest growth in more than seven years
    • Spending on goods was up 0.1% while spending on services increased only 0.4%. The PCE contribution to Q1 GDP was just 0.23 percentage points
    • There was some notable strength in nonresidential and residential fixed investment. Combined those two areas contributed 1.62 percentage points to first quarter growth
    • Net exports added less than 0.1 percentage points
    • Real final sales, which exclude the change in private inventories, were up 1.6%. That was actually an acceleration from the 1.1% growth rate seen in the fourth quarter, yet it still isn't all that strong

10-Yr: -2/32… EUR/USD: 1.0898… USD/JPY: 111.44…

10:32AM ET

Treasury Yields Back to Unchanged

  • Treasuries are losing a little bit of ground this morning as the S&P 500 loses 0.12% at 2,385.9. The U.S. Dollar Index is down 0.07% to 99.01 and gold is up 0.17% to $1,268.1/troy oz. WTI crude is higher by 0.96% at $49.44/bbl.
  • Fed Governor Lael Brainard is still set to speak today (13:15 ET) and she rarely speaks in public so her comments could be market-moving. On the other hand, Fed governors tend to be less blunt about their opinions in public than regional Fed presidents, so markets may do nothing at all. Brainard was the Under Secretary of the Treasury for International Affairs during the Obama administration so she tends to focus more on the global economy than some other policymakers. With the external environment improving since the second half of 2016, it is possible that Brainard throws out a slightly hawkish curveball. Of course, Brainard also began questioning the usefulness of the Phillips curve back in the fall of 2015, so she has other reasons for being dovish besides risks to the international economy. The Phillips curve describes the theoretical inverse relationship between unemployment and inflation. Brainard said in 2015 that the FOMC might want to rethink its use of unemployment measures to anticipate an uptick in inflation
  • Yield Check:
    • 2-yr: unch at 1.27%
    • 5-yr: unch at 1.83%
    • 10-yr: unch at 2.30%
    • 30-yr: +1 bp to 2.97%

10-Yr: -1/32… EUR/USD: 1.0907… USD/JPY: 111.41…

10:10AM ET

Treasuries Rally to Session Highs

  • U.S. Treasuries are trading mostly unchanged today as the S&P 500 loses 0.07% at 2,387.2 and the U.S. Dollar Index falls 0.09% to 98.99. WTI crude is up by 1.18% to $49.56/bbl. and gold is higher by 0.13% to $1,267.5/troy oz.
  • The Michigan Sentiment Index was revised down to 97.0 for April from the initial estimate of 98.0. March's reading was 96.9
    • The Current Conditions measure was revised down to 112.7 from 115.2
    • The Expectations gauge was revised up to 87.0 from 86.9
  • The Chicago PMI came in at 58.3 for April. The Briefing.com consensus was 56.9 and the prior reading was 57.7 
  • Yield Check:
    • 2-yr: unch at 1.27%
    • 5-yr: unch at 1.83%
    • 10-yr: unch at 2.30%
    • 30-yr: unch at 2.97% 
  • More on the Employment Cost Index:
    • The first quarter Employment Cost Index showed compensation costs increased 0.8% (Briefing.com consensus +0.6%) on the heels of a 0.5% increase for the fourth quarter
    • The key takeaway from the report is that compensation costs are moving higher, which will create some profit margin constraints while at the same time lending employees some increased spending power
    • Wages and salaries, which make up about 70% of compensation costs, rose 0.8% in the fourth quarter while benefits, which make up the remaining portion of compensation costs, increased 0.7%
    • For the 12-month period ending in March, compensation costs for civilian workers increased 2.4%. That is up from the 2.2% increase seen for the 12-month period ending in December. Wages and salaries increased 2.5% year-over-year (versus 2.3% for 12 months ending December) while benefit costs increased 2.2% (versus 2.1% for 12 months ending December)
    • For private industry workers, compensation costs increased 2.3% year-over-year (versus 2.2% for 12 months ending December)
    • For state and local government workers, compensation costs increased 2.6% for the 12-month period ending in March (versus 2.4% for 12 months ending December)
    • Employment costs are the major component of business costs. The trend in these data, therefore, are looked at as a signal for cost-push inflationary pressures

10-Yr: -2/32… EUR/USD: 1.0909… USD/JPY: 111.49…

09:29AM ET

Treasuries Recover Some Losses but Remain Lower

  • U.S. Treasury yields are still higher this morning as prices decline following the weaker-than-expected U.S. GDP growth number for Q1 (0.7% vs. 1.1% Briefing.com consensus). We noted during Thursday's session that there were plenty of factors that could have spurred some buying of U.S. government debt (German bund rally, very strong 7-year auction, declining oil prices) and the bulls really failed to get anything going. This makes it a little bit less surprising that Treasury prices are lower on a weak GDP number. The S&P 500 is set to open 0.13% to 2,391.7 and the U.S. Dollar Index is losing 0.10% at 98.98. WTI crude is adding 0.86% at $49.39/bbl. and gold is up 0.03% to $1,266.2/troy oz.
  • Deutsche Bank Chief Economist Joseph LaVorgna is attributing some of the weakness in Q1 GDP growth to adverse weather
    • He notes that Q1 GDP has missed estimates by an average of six tenths of a percentage point over the past five years and that four of those have been revised up by three quarters of a percentage point
    • LaVorgna also says that capital expenditures were up 9.1% vs. 1.9%, the best growth since Q3 2015
  • It bears repeating that the eurozone's core consumer price index was up 1.2% y/y in April, exceeding economists' expectations for something closer to 1.0%. March's core inflation rate was 0.7%
  • Yield Check:
    • 2-yr: unch at 1.26%
    • 5-yr: +2 bps to 1.84%
    • 10-yr: +2 bps to 2.31%
    • 30-yr: +1 bp to 2.98%

10-Yr: -4/32… EUR/USD: 1.0911… USD/JPY: 111.57…

08:42AM ET

Treasuries Fall Sharply After GDP Release

  • U.S. Treasuries are trading sharply lower this morning after the release of the first official estimate of U.S. Q1 GDP growth. The S&P 500 is set to open up 0.07% to 2,390.4 and WTI crude is adding 1.51% to $49.71/bbl. Gold is higher by 0.06% at $1,266.6/troy oz. and the U.S. Dollar Index is down 0.14% to 98.94
  • U.S. gross domestic product grew by 0.7% q/q in the first quarter, according to preliminary data. The Briefing.com consensus was 1.1% and the prior reading was 2.1%
    • There will be plenty of conversation about residual seasonality in the wake of this release. Q1 growth readings have been weaker than the other three quarters throughout the recovery from the financial crisis
    • The Chain Deflator rose 2.2% q/q in the first quarter, faster than expected after 2.1% growth in Q4
    • The Employment Cost Index rose by 0.8% q/q in the first quarter, exceeding expectations after 0.5% growth in Q4
  • Yield Check:
    • 2-yr: +2 bps to 1.29%
    • 5-yr: +3 bps to 1.85%
    • 10-yr: +3 bps to 2.33%
    • 30-yr: +3 bps to 2.99%

10-Yr: -8/32… EUR/USD: 1.0922… USD/JPY: 111.63…

08:10AM ET

Eurozone Yields Jump on Faster Inflation

  • Eurozone sovereign debt spent today's session unwinding much of the Thursday gains that followed the ECB rate decision and ECB President Draghi's press conference. After declining to 0.29% yesterday, the 10-year German bund yield is back up to 0.35%, the prevailing level from before Thursday's ECB announcement. Data released earlier today showed that the eurozone's core CPI rose 1.2% y/y in April, the fastest pace since 2013. German retail sales grew more than expected in March but French consumer spending fell for the second-straight month. Spain's GDP growth beat estimates in the first quarter but U.K. growth came up short. There is a lot to digest, but the eurozone inflation data is the most important
  • European Economic Data:
    • The eurozone's consumer price index rose 1.9% y/y in April, beating estimates after 1.5% inflation in March
      • The core CPI was up 1.2% y/y in April (0.7% prior)
      • Broad money, as measured by M3, was up 5.3% y/y in March (4.7% prior)
    • German retail sales increased by 0.1% m/m in March (2.3% y/y), exceeding forecasts after a 1.1% jump in February
    • French Consumer Spending was down 0.4% m/m in March, badly missing expectations after a 0.7% decline in February
    • Spain's GDP increased by 0.8% q/q in the first quarter (3.0% y/y), topping estimates following 0.7% growth in Q4
      • Retail sales grew by 0.9% y/y in March, also beating estimates after 0.4% growth in February
    • Italy's CPI rose by 0.3% m/m in April (2.0% y/y), topping estimates after remaining unchanged in March
    • The U.K.'s GDP was up 0.3% q/q in the first quarter (2.1% y/y), missing estimates after 0.7% growth in Q4
      • In the U.K., GfK Consumer Confidence fell to -7 from -6, as expected
      • The Nationwide House Price Index fell by 0.4% m/m in April (+2.6% y/y), missing expectations after a 0.3% decline in March
      • BBA Mortgage Approvals fell more than expected to 41.1K in March from 42.2K in February
    • In Switzerland, KOF Leading Indicators unexpectedly fell to 106.0 in April from 107.2 in March
  • Yield Check:
    • France, 10-yr OAT: +4 bps to 0.87%
    • Germany, 10-yr bund: +5 bps to 0.34% 
    • Greece, 10-yr note: -5 bps to 6.26%
    • Italy, 10-yr BTP: +3 bps to 2.29%
    • Portugal, 10-yr PGB: +6 bps to 3.50%
    • Spain, 10-yr ODE: +1 bp to 1.65%
    • U.K., 10-yr gilt: +3 bps to 1.09%

10-Yr: -3/32… EUR/USD: 1.0932… USD/JPY: 111.43…

07:37AM ET

Treasuries Hesitate Ahead of GDP Report

  • U.S. Treasuries are trading little-changed this morning ahead of the first official reading of U.S. Q1 GDP growth. There was a torrent of economic data since the U.S. close on Thursday. Essentially, Japan was mixed with household spending and industrial production coming up short but retail sales surpassing expectations. U.K. GDP growth was slightly weaker than expected and home prices disappointed there as well. The eurozone data was generally stronger than expected with CPI growth topping expectations and German retail sales growing faster than forecasts. The S&P 500 is set to open up 0.09% to 2,390.9 and the U.S. Dollar Index is down 0.28% to 98.79. WTI crude is higher by 0.94% at $49.43/bbl. and gold is up 0.22% to $1,268.7/troy oz.
  • Yield Check:
    • 2-yr: unch at 1.26%
    • 5-yr: unch at 1.83%
    • 10-yr: +1 bp to 2.31%
    • 30-yr: +1 bp to 2.98%
  • International News:
    • In Japan, household spending fell by 2.0% m/m in March (-1.3% y/y), missing estimates after a 2.5% increase in February
      • Industrial production declined by 2.1% m/m in March, missing forecasts after a 3.2% jump in February
      • Retail sales were up 2.1% y/y in March, beating estimates after a 0.1% increase in February
      • Japan's National Consumer Price Index rose by 0.2% y/y in March, missing expectations after 0.3% growth in February
      • Japan's National Core CPI was up 0.2% y/y in March, also missing expectations after 0.2% growth in February
      • The Tokyo Core CPI fell by 0.1% y/y in April, beating estimates for a sharper decline after a 0.4% slide in March
      • The Tokyo CPI fell by 0.1% y/y in April, also beating estimates after a 0.4% drop in March
      • Japan's unemployment rate remained at 2.8% in March. Economists had expected an uptick
      • Construction orders rose by 1.1% y/y in March (5.7% prior)
      • Housing starts increased by 0.2% y/y in March (-2.6% prior)
    • Korean industrial production was up 1.0% m/m in March (3.0% y/y), missing expectations after a 3.3% decline in February
    • Australia's producer price index rose 0.5% q/q in the first quarter of 2017 (1.3% y/y), beating estimates and matching Q4 2016's pace
      • Australia's Private Sector Credit grew by 0.3% m/m in March, missing forecasts for improvement from February's 0.3% pace
    • New Zealand's ANZ Business Confidence Index fell to 11.0 in April from 11.3 in March
      • Building consents fell by 1.8% m/m in March after a 17.2% jump in February
      • New Zealand's trade balance improved less than expected to a surplus of NZD332 mln in March from a deficit of NZD50 mln in February
    • The eurozone's consumer price index rose 1.9% y/y in April, beating estimates after 1.5% inflation in March
      • The core CPI was up 1.2% y/y in April (0.7% prior)
    • German retail sales increased by 0.1% m/m in March (2.3% y/y), exceeding forecasts after a 1.1% jump in February
    • French Consumer Spending was down 0.4% m/m in March, badly missing expectations after a 0.7% decline in February
    • Spain's GDP increased by 0.8% q/q in the first quarter (3.0% y/y), topping estimates following 0.7% growth in Q4
      • Retail sales grew by 0.9% y/y in March, also beating estimates after 0.4% growth in February
    • The U.K.'s GDP was up 0.3% q/q in the first quarter (2.1% y/y), missing estimates after 0.7% growth in Q4
      • In the U.K., GfK Consumer Confidence fell to -7 from -6, as expected
      • The Nationwide House Price Index fell by 0.4% m/m in April (+2.6% y/y), missing expectations after a 0.3% decline in March
    • In Switzerland, KOF Leading Indicators unexpectedly fell to 106.0 in April from 107.2 in March
  • Data out Friday:
    • Q1 GDP -- Adv. and Q1 Chain Deflator -- Adv (08:30 ET)
    • Q1 Employment Cost Index (08:30 ET)
    • April Chicago PMI (09:45 ET)
    • April Michigan Sentiment -- Final (10:00 ET)
  • Fed Speakers:
    • Fed Governor Brainard (13:15 ET)
    • Philadelphia Fed President Harker (FOMC voter) (14:30 ET)

10-Yr: -3/32… EUR/USD: 1.0936… USD/JPY: 111.37…

03:08PM ET

Treasuries Struggle to Rally with Bullish Tailwinds

  • U.S. Treasuries advanced to minor gains today as they navigated several cross-currents in monetary policy, economic data, and new supply. The European Central Bank's Governing Council announced its latest policy decision at 07:45 ET, which was no change to the EUR60 bln/month of asset purchases nor to the ECB's policy rates. This decision was in line with expectations but some traders in eurozone government bonds were clearly betting on slightly more hawkish guidance from the ECB's accompanying statement or from President Draghi's press conference because the German 10-year bund yield fell six basis points to 0.29% after the news. The Durable Goods Orders report for March showed both the headline and core numbers missing estimates but February's data was revised upward. Finally, the seven-year Treasury auction was met with very strong demand. These three factors, which really should have been bullish in aggregate for Treasuries, failed to produce strong gains for U.S. government notes and bonds. The first official estimate of U.S. GDP is due out on Friday morning and so positioning might have been hesitant today. In other markets, the S&P 500 rebounded from a low of 2,382.7 to trade 0.05% higher at 2,388.7. The U.S. Dollar Index is up 0.07% to 99.12
  • Yield Check:
    • 2-yr: -2 bps to 1.26%
    • 5-yr: -2 bps to 1.82%
    • 10-yr: -1 bp to 2.30%
    • 30-yr: unch at 2.97%
  • News:
    • U.S. durable goods orders rose by just 0.7% m/m in March, missing the Briefing.com consensus for 1.2% and slowing from February's pace of 2.3% growth (revised from 1.7%)
      • Durable goods orders excluding transportation fell by 0.2% m/m, missing the Briefing.com consensus of +0.4%. February's growth was 0.7% (revised from 0.4%)
    • U.S. pending home sales fell 0.8% m/m in March, slightly beating economists' forecasts but reversing some of February's 5.5% jump
    • Initial jobless claims rose to 257K for the week ending April 22 from the prior week's 243K. The Briefing.com consensus was 242K
      • Deutsche Bank Chief Economist Joseph LaVorgna attributed the weakness to the Easter/Passover holiday
      • Continuing jobless claims rose to 1988K for the week ending April 15 from the prior reading of 1979K
    • The advance estimate for the international trade in goods remained at -$64.8 bln, slightly greater than the Briefing.com consensus of -$65.0 bln
    • The Kansas City Fed's Composite Index fell more than expected to 7 in April from 20 in March
      • The manufacturing index fell to 12 from 37
    • The $28 bln 7-year Treasury auction stopped through by roughly two basis points
      • High yield: 2.084%
      • Bid-to-cover: 2.73 (highest since 2012)
      • Indirect bid: 81.7% (highest since 2009)
      • Direct bid: 9.5%
  • Commodities:
    • WTI crude: -0.95% to $49.15/bbl.
    • Gold: +0.12% to $1,265.7/troy oz.
    • Copper: -0.21% to $2.595/lb.
  • Currencies:
    • EUR/USD: -0.26% to 1.0877
    • USD/JPY: +0.15% to 111.23
  • Data out Friday:
    • Q1 GDP -- Adv. and Q1 Chain Deflator -- Adv (08:30 ET)
    • Q1 Employment Cost Index (08:30 ET)
    • April Chicago PMI (09:45 ET)
    • April Michigan Sentiment -- Final (10:00 ET)
  • Fed Speakers:
    • Fed Governor Brainard (13:15 ET)
    • Philadelphia Fed President Harker (FOMC voter) (14:30 ET)

10-Yr: +2/32… EUR/USD: 1.0877… USD/JPY: 111.23…

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