The Market at 03:36PM ET
Moving the Market
Durable Orders: Actual 0.7%, consensus 0.3%, prior -0.9% (revised -1.0%)
Durable Orders ex-transportation: Actual 0.8%, consensus 0.7%, prior 0.0% (revised -0.1%)
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 calender 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.
Treasuries Linger Near the Highs:
- Treasuries hold just off their best levels of the session as trade drifts into the lunchtime hour.
- Early strength continues to have the biggest impact at the long end of the curve has the 30y trades -4.5bps @ 3.255%. Traders will be watching this area closely as any close below 3.252% would be a 13-month low.
- The 10y holds -2.9bps @ 2.480%. The key 2.450% area is in focus as a breakdown drops the benchmark yield to levels last seen in June 2013. The next level of support would be near 2.200%/2.250%.
- In the belly, the 5y is -1bp @ 1.690%. The 50 and 100 dma continue to provide help near 1.650%.
- A flatter curve persists as the 2-10-yr spread trades 199bps.
- Precious metals remain bid with gold +$7 @ $1298 and silver +$0.11 @ $20.52.
DXY Testing 81: The Dollar Index is testing the 81.00 level for the first time since June 5. The dollar is bumping up against multi-month resistance as it remains in an upward trend. This will mark a big hurdle for the DXY. It comes ahead of a busy week of economic data that includes an FOMC meeting (Wed) and culminates with one of the busiest days of economic data on record (Friday) when jobs, personal income & spending, ISM, construction spending, and vehicle sales all hit the wires.
- The euro in the mean time is sliding towards the low end of 1.3400. The currency is getting hit on concerns that economic ties with Russia will see further strain as the region prepares additional sanctions. German consumer and business confidence missed expectations adding to the pressure.
- The pound has slipped below the key 1.7000 level and is trading at its lowest against the dollar since June 19. This is of course the day after the Fed meeting. The pound is testing its 50 sma. Sterling remains strong overall, but is being outpaced by the dollar over the past couple of weeks.
- The yen was sliding back to test the 102 level, but has reversed course this morning as investors pullback risk trades. Weaker earnings news and continued geopolitical pressures have led to the risk off trade. But it should be noted that equities were overextended and buyers exhausted in the short term. Overall, the yen move has not been all that impressive as it moves back to 101.70, but remains in a tight trading range in the 101 level.
Treasuries See Early Strength:
- Treasuries remain bid as equity markets open with sizable losses.
- Strength at the long end has the 30y lower by -3.9bps @ 3.261%. The yield is just 1bp away from its lowest close in 13 months.
- The 10y trades -2.6bps @ 2.483%. A move below the 2.450% level will put pressure on the May lows.
- In the belly, the 5y is -0.5bps @ 1.695%. Early action has seen the yield struggle to hold three-week highs.
- Notable flattening has the 5-30-yr spread tighter @ 156.5bps.
- Precious metals hold firm with gold +$4 @ $1295 and silver +$0.06 @ $20.48.
- Treasuries are firming following the better than expected durable orders (0.7% actual v. 0.3% expected) report.
- Early strength is having the biggest impact on the long end as the 30y trades -2.6bps @ 3.274%.
- A -1.6bp decline has the 10y @ 2.493% as action slips back below the 2.500% barrier.
- In the belly, the 5y holds -0.5bps @ 1.695%.
- A flatter curve remains in play as the 2-10-yr spread trades 200bps.
- Precious metals hold firm with gold +$4 @ $1295 and silver +$0.08 @ $20.50.
- Yields are lower across Europe with the periphery outperforming.
- Eurozone private loans (-1.7% YoY actual v. -1.8% YoY expected) and M3 money supply (1.5% YoY actual v. 1.1% YoY expected) both outperformed estimates.
- German Bunds hold small gains following the mixed GfK German Consumer Climate (9.0 actual v. 8.9 expected, 8.9 previous) and German Ifo Business Climate (108.0 actual v. 109.6 expected, 109.7 previous) surveys. A light bid has the 10y -1bp @ 1.170%.
- UK Gilts are ticking higher amid an uneventful trade. The 10y holds -1bp @ 2.600% as action continues to test support in the area that dates back to November.
- French OATs are firm. A -1bp decline has the 10y holding @ 1.570%.
- Spanish Bonos outperform the rest of the region despite a lack of news and data. A -4bp decline has the 10y @ 2.525%, a record low.
- Italian BTPs sport modest gains. The 10y trades -3bps @ 2.595%, a lifetime low.
Dollar Ticks Higher in Early Trade:
- The Dollar Index holds small gains as action probes the 80.90 level.
- The early bid has the Index higher for a fifth straight session, and on track to close at its best level in seven and a half months.
- EURUSD is -10 pips @ 1.3450 as sellers have taken control despite today's mostly upbeat data. Eurozone private loans (-1.7% YoY actual v. -1.8% YoY expected), M3 money supply (1.5% YoY actual v. 1.1% YoY expected), and GfK German Consumer Climate (9.0 actual v. 8.9 expected, 8.9 previous) all topped estimates, but the disappointing German Ifo Business Climate (108 actual v. 109.6 expected, 109.7 previous) is weighing. Any loss on the day would make for the lowest close since November.
- GBPUSD is -5 pips @ 1.6980 as sellers look to remain in control for an eighth straight day. The light selling comes following the in-line preliminary GDP print of 0.8% QoQ, and has action flirting with support in the area helped by the 50 dma.
- USDCHF is +5 pips @ .9030 as action ticks to a five and a half-month high. A quiet trade has held the pair in a tight 25 pip range as trade remains a derivative of the euro.
- USDJPY is +5 pips @ 101.85 as buyers fight to remain in control for a sixth day. Today's advance has run the pair above the 50 dma and comes as Tokyo CPI held at 2.8% YoY (2.7% YoY expected). The less closely followed National CPI eased to 3.3% YoY (3.3% YoY expected, 3.4% YoY previous). Many will be watching the 102.00 level as both the 100 and 200 dma lurk in the vicinity.
- AUDUSD is -5 pips @ .9410 as selling takes hold for a second day. Minor support rests near .9400, but the .9350 level and the 50 dma are far more important.
- USDCAD is +15 pips @ 1.0760 as action tests the July highs. Overhead resistance near 1.0800 is defended by the 50 and 200 dma.
Treasuries Trade Mixed:
- Treasuries trade little changed ahead of the cash open.
- Overnight ranges were slightly wider than usual, expanding to almost 4bps in the belly.
- The 2y is flat @ 0.496% as action continues to press resistance near 0.500%.
- In the belly, the 5y holds +0.8bps @ 1.708%. Yesterday's close was the highest in nearly three weeks, and has some looking towards the 1.750% level.
- The 10y trades -0.2bps @ 2.507%. The benchmark yield flirts with the resistance at the 2.500% level.
- At the long end, the 30y is -1.3bps @ 3.287%. Yesterday's selling ran action off the lowest levels in 13 months.
- A slightly flatter curve has taken hold as the 2-10-yr spread trades 201bps.
- Precious metals are on their best levels of the day with gold +$5 @ $1296 and silver +$0.10 @ $20.52.
- Data: Durable orders (8:30).
10y Retakes 2.50%:
- Treasuries finished near their worst levels of the session.
- Maturities held small losses into the cash open and were sent to their worst levels of the day as initial claims (284K actual v. 303K expected) slid to their lowest level in almost eight and half years.
- New home sales (406K actual v. 475K expected) fell short of estimates, but trade saw little response to the miss.
- The complex would drift near the lows into this afternoon's $15 bln 10y TIPs auction, and held at those levels following the in-line results.
- 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%.
- The 2y ticked up +2.4bps to 0.496%. The yield tested key support near 0.450% before moving up to 0.500% resistance.
- In the belly, the 5y added +5bps to 1.700% and ended at its highest level in two and a half weeks. A finish above 1.755% would be the highest since early-April.
- The 10y rallied +4.5bps to 2.509%. The benchmark yield closed at a one-week high, causing many to shift their focus towards 2.550% resistance and the 50 dma.
- At the long end, the 30y climbed +4.2bps to 3.300%. Today's selling ran the yield off 13-month lows, setting up a test of 3.350% resistance.
- A steeper curve developed with the 2-10-yr spread widening to 201.5bps.
- Precious metals were pressured as gold fell -$12 to $1293 and silver shed -0.58 to $20.41.
- Data: Durable orders (8:30).
Dollar Holds at Best Levels Since February:
- The Dollar Index trades little changed near 80.85.
- A quiet U.S. session has seen action stuck in a tight 10 cent range for much of the day.
- EURUSD is +5 pips @ 1.3465 as a light bid surfaces for the first time in eight days. The single currency has been buoyed by the region's mostly better than expected PMI data, and has managed to shrug off headlines indicating Espirito Santo Financial Group is seeking protection from creditors. Support in the area remains under close watch. Eurozone data is heavy with M3 money supply, private loans, GfK German Consumer Climate, and German Ifo Business Climate all due out.
- GBPUSD is -55 pips @ 1.6985 as trade presses lower for a seventh day. Today's selling developed following the disappointing retail sales figure, and has dropped action onto support helped by the 50 dma. A close below 1.6960 would be the lowest in one and a half months. Britain's preliminary GDP will cross the wires tomorrow.
- USDCHF is unchanged @ .9025 as trade holds at five and a half-month highs. U.S. trade has been lackluster with the pair trapped in a tight 10 cent range.
- USDJPY is +30 pips @ 101.85 as trade marches higher for a fifth session. Buyers have been in control since last night's wider than anticipated Japanese trade deficit, and have run action to a two-week high. The 50 dma helps resistance at the level. Japanese data set for tonight is limited to Tokyo Core CPI.
- AUDUSD is -25 pips @ .9415 as action presses the lows. The hard currency attracted early buyers after neighboring New Zealand hiked its key rate and China's Manufacturing PMI outpaced estimates; however, steady selling over the course of the session has trade sliding back towards .9350 support.
- USDCAD is +25 pips @ 1.0750 as trade ticks to its best levels of the day. The 1.0760 area is of particular interest as a close above there would be the best in a month.