Updated: 12-15-2017

The Market at 03:29PM ET
10-Year: -1/32…2.355…
EUR/USD: 1.1758…
USD/JPY: 112.60…

Moving the Market

-- Longer-dated maturities continue showing relative strength

-- December Empire Manufacturing (actual: 18.0; Briefing.com consensus: 18.0; previous: 19.4)

-- November Industrial Production (actual: 0.2%; Briefing.com consensus: 0.3%; previous: 0.9%) and Capacity Utilization (actual: 77.1%; Briefing.com consensus: 77.2%; previous: 77.0%)

-- December net Long-Term TIC Flows (previous: $80.90 billion) at 16:00 ET

03:29PM ET

Long Bond Climbs Again

  • U.S. Treasuries ended the week on a mixed note, as shorter-dated maturities registered modest losses while the long bond continued its show of relative strength. A wave of selling developed in the wake of an in-line December Empire Manufacturing report (actual: 18.0) and continued through the release of below-consensus Industrial Production for November (actual: 0.2%; Briefing.com consensus: 0.3%). The 2-yr note and the 5-yr note saw some light intraday buying, but couldn't climb too far above their morning lows. Meanwhile, the 10-yr note erased the bulk of its morning decline and the long bond powered to a fresh high after reclaiming its entire post-data loss. Reports from Washington suggested that the tax bill is back on track for passage after Senator Marco Rubio's support was regained. That said, the Treasury market has questions about the plan's ability to boost economic growth, evidenced by the decline in the 30-yr yield over the past three months. The yield curve flattening trend continued with the 2s10s spread compressing to 52 bps from last Friday's 58 bps. The 2s30s spread contracted to 85 bps from 97 bps one week ago.
  • Yield Check:
    • 2-yr: +4 bps to 1.84%
    • 5-yr: +3 bps to 2.16%
    • 10-yr: +1 bp to 2.36%
    • 30-yr: -2 bps to 2.69%
  • News:
    • Senator Marco Rubio will reportedly vote in favor of the final tax bill after the proposed child tax credit was increased to $1,400 from $1,100.
    • Industrial production increased 0.2% in November (Briefing.com consensus +0.3%) on the heels of an upwardly revised 1.2% increase (from +0.9%) in October. The capacity utilization rate was 77.1% (Briefing.com consensus 77.2%), up slightly from an unrevised 77.0% for October.
      • The key takeaway from the report is that industrial production was flat in November, excluding the post-hurricane rebound in oil and gas extraction.
  • Commodities:
    • WTI crude: +0.4% to $57.29/bbl
    • Gold: +0.1% to $1257.70/ozt
    • Copper: +2.0% to $3.13/lb
  • Currencies:
    • EUR/USD: -0.2% to 1.1758
    • USD/JPY: +0.2% to 112.60
  • The Week Ahead:
    • Monday: December NAHB Housing Market Index (prior: 70) at 10:00 ET
    • Tuesday: November Housing Starts (prior: 1.290 million), November Building Permits (prior: 1.297 million), and Q3 Current Account Balance (prior: -$123.10 billion) at 8:30 ET
    • Wednesday: weekly MBA Mortgage Index (prior: -2.3%) at 7:00 ET; November Existing Home Sales (prior: 5.48 million) at 10:00 ET; and weekly Crude Inventories (prior: -5.1 million) at 10:30 ET
    • Thursday: Q3 GDP - Third Estimate (prior: 3.3%), Q3 GDP Deflator - Third Estimate (prior: 2.1%), December Philadelphia Fed Index (prior: 22.7), weekly Initial Claims (prior: 225K), and Continuing Claims (prior: 1886K) at 8:30 ET; October FHFA Housing Price Index (prior: 0.3%) at 9:00 ET; and weekly Natural Gas Inventories (prior: -69 bcf) at 10:30 ET
    • Friday: November Personal Income (prior: 0.4%), Personal Spending (prior: 0.3%), PCE Prices (prior: 0.1%), PCE Prices - Core (prior: 0.2%), November Durable Orders (prior: -1.2%), and Durable Goods -ex transportation (prior: 0.4%) at 8:30 ET; November New Home Sales (prior: 685K) and December Michigan Sentiment -- Final (prior: 96.8) at 10:00 ET

10-Yr: -1/32… EUR/USD: 1.1758… USD/JPY: 112.60…

02:15PM ET

Dollar Index Reclaims 50-Day Moving Average

  • The U.S. Dollar Index is up 0.5% at 93.96, returning above its 50-day moving average (93.80) after finding resistance near that level during yesterday's session. The dollar saw some overnight selling, but began staging a rebound during the European session, continuing its push into morning action. The morning rebound accelerated after the release of an in-line Empire Manufacturing report for December (18.0). The final thrust to a session high took place even though the November Industrial Production report (actual: 0.2%; Briefing.com consensus: 0.3%) missed expectations. Thanks to today's rebound, the Index is on track for its third consecutive weekly advance, looking to eke out a slim gain of 0.1%.
  • EUR/USD: -0.18% to 1.1757
    • Action remains above 50-day moving average at 1.1762
    • Eurozone October trade surplus EUR18.90 billion (expected EUR24.60 billion; last EUR26.40 billion)
    • A small group of ECB officials reportedly lobbied for an acknowledgment in the policy statement that guidance may change if inflation continues accelerating.
  • GBP/USD: -0.84% to 1.3317
  • USD/CHF: +0.23% to 0.9912
  • USD/JPY: +0.26% to 112.69
    • Japan's auto union will reportedly seek a JPY3,000 base pay increase.
    • Japan's Q4 Tankan Large Manufacturers Index 25 (expected 24; last 22), Tankan Q4 Large Non-Manufacturers Index 23 (expected 24; last 23), and Q4 Tankan All Big Industry CAPEX 7.4% (expected 7.5%; last 7.7%).
  • USD/CNY: UNCH at 6.609
    • The People's Bank of China announced it will accept more kinds of bonds as collateral, including local government bonds.
  • USD/INR: -0.31% to 64.08
    • Rupee hits best level since mid-September
  • USD/RUB: -0.06% to 58.82
  • USD/TRY: -0.60% to 3.861
  • USD/BRL: -1.02% to 3.308
  • USD/MXN: +0.03% to 19.09
  • USD/ZAR: -2.57% to 13.16
    • Rand reclaims 200-day moving average at 13.33
    • South Africa will choose a new leader for the African National Congress tomorrow. The new leader will replace Jacob Zuma, who has presided over the ANC since 2007
  • USD/CAD: +0.63% to 1.2876
  • AUD/USD: -0.33% to 0.7641
    • Aussie pulls back after touching 200-day moving average at 0.7691 (50-day moving average at 0.7667)
  • NZD/USD: +0.14% to 0.6991
    • New Zealand's November Business NZ PMI 57.7 (last 57.2)

10-Yr: -3/32… EUR/USD: 1.1757… USD/JPY: 112.68…

11:25AM ET

Short End Dips; Long End Holds

  • Longer-dated Treasuries have not seen much movement as of late while 2s and 5s have extended their losses. The selling along the short end has taken place amid a rally in the equity market. The S&P 500 is up 0.7%, looking to end the day at a fresh record high. The index is up 0.9% for the month, extending its 2017 advance to 19.4%.
  • Yield Check:
    • 2-yr: +5 bps to 1.85%
    • 5-yr: +5 bps to 2.18%
    • 10-yr: +2 bps to 2.37%
    • 30-yr: UNCH at 2.71%

10-Yr: -6/32… EUR/USD: 1.1766… USD/JPY: 112.69…

09:46AM ET

Flattening Continues

  • Recent action saw 2s, 5s, and 10s retreat to fresh session lows while the long bond has also seen some selling, but continues trading comfortably above its overnight low. Economic data released this morning included an in-line Empire Manufacturing Survey for December (actual: 18.0) and a November Industrial Production report (actual: 0.2%; Briefing.com consensus: 0.3%), which came up shy of estimates. Above all, yield curve flattening has continued this week, putting the 2s10s spread on track to compress six basis points to 52 bps for the week. For its part, the 2s30s spread is currently at 87 bps, down 11 bps for the week.
  • Yield Check:
    • 2-yr: +4 bps to 1.84%
    • 5-yr: +3 bps to 2.16%
    • 10-yr: +2 bps to 2.37%
    • 30-yr: UNCH at 2.71%

10-Yr: -3/32… EUR/USD: 1.1775… USD/JPY: 112.33…

09:33AM ET

Econ Recon

  • Industrial production increased 0.2% in November (Briefing.com consensus +0.3%) on the heels of an upwardly revised 1.2% increase (from +0.9%) in October. The capacity utilization rate was 77.1% (Briefing.com consensus 77.2%), up slightly from an unrevised 77.0% for October.
    • Manufacturing output increased 0.2%, led by a 0.4% gain for durables. Motor vehicle assemblies slipped 0.9% to a seasonally adjusted annual rate of 10.93 million units. The index for nondurable manufacturing as unchanged.
    • Mining output surged 2.0% in November, fueled by a 3.0% increase in oil and gas extraction.
    • The output of utilities dropped 1.9%, as a decrease for electric utilities outweighed an increase for natural gas utilities.
    • On a year-over-year basis, total industrial production is up 3.4%. The capacity utilization rate of 77.1%, meanwhile, is 2.8 percentage points below its long-run average.
  • The key takeaway from the report is that industrial production was flat in November, excluding the post-hurricane rebound in oil and gas extraction.
     
  • Yield check:
    •  2-yr: +4 bps to 1.84%
    • 5-yr: +4 bps to 2.17%
    • 10-yr: +2 bps to 2.37%
    • 30-yr: UNCh at 2.71%

10-Yr: -4/32… EUR/USD: 1.1785… USD/JPY: 112.34…

08:07AM ET

Greek Benchmark Yield Falls Below 4.00%

  • European yields are lower across the board to finish the week with Greek issues showing relative strength once again. European Council President Donald Tusk confirmed that Brexit negotiations will now move to the second phase. German Chancellor Angela Merkel cautioned that the first stage was the 'easy part.' A small group of ECB officials reportedly lobbied for an acknowledgment in the policy statement that guidance may change if inflation continues accelerating. Meanwhile, ECB member Jens Weidmann said that loose monetary policy has contributed to a deceptive calm, and that it is wrong to believe the region is prepared for all possibilities.
  • European Economic Data:
    • Eurozone October trade surplus EUR18.90 billion (expected EUR24.60 billion; last EUR26.40 billion)
  • Yield Check:
    • France, 10-yr OAT: -2 bps to 0.63%
    • Germany, 10-yr bund: -2 bps to 0.30%
    • Greece, 10-yr note: -10 bps to 3.99%
    • Italy, 10-yr BTP: -2 bps to 1.77%
    • Portugal, 10-yr PGB: -6 bps to 1.75%
    • Spain, 10-yr ODE: -3 bps to 1.41%
    • U.K., 10-yr gilt: -3 bps to 1.15%

10-Yr: UNCH… EUR/USD: 1.1807… USD/JPY: 112.17…

07:54AM ET

Short End Dips

  • Shorter-dated Treasuries have seen some light overnight selling while 10s and 30s have shown continued relative strength. The latest reports from Washington indicate that Senator Marco Rubio and Senator Mike Lee are not entirely sold on the current version of the tax bill. The response in the bond market has been minimal, because the market never got excited about the tax bill in the first place. Overnight, the People's Bank of China announced it will accept more kinds of bonds as collateral, including local government bonds.
  • Yield Check:
    • 2-yr: +2 bps to 1.82%
    • 5-yr: +1 bp to 2.14%
    • 10-yr: UNCH at 2.35%
    • 30-yr: UNCH at 2.71%
  • News:
    • Reports from Japan indicate that Japan's auto union will seek a JPY3,000 base pay increase.
    • U.S. special envoy to North Korea, Joseph Yun, said that the U.S. is open to talks with North Korea, but he did not meet DPRK officials during his trip to Japan and Thailand.
    • Japan's Q4 Tankan Large Manufacturers Index 25 (expected 24; last 22), Tankan Q4 Large Non-Manufacturers Index 23 (expected 24; last 23), and Q4 Tankan All Big Industry CAPEX 7.4% (expected 7.5%; last 7.7%).
    • New Zealand's November Business NZ PMI 57.7 (last 57.2)
  • Data out Today:
    • December Empire Manufacturing (previous: 19.4) at 8:30 ET
    • November Industrial Production (previous: 0.9%) and Capacity Utilization (previous: 77.0%) at 9:15 ET
    • December net Long-Term TIC Flows (previous: $80.90 billion) at 16:00 ET

10-Yr: -1/32… EUR/USD: 1.1797… USD/JPY: 112.19…

03:31PM ET

Long Bond Remains Strong

  • U.S. Treasuries ended Thursday on a mixed note, as the 5-yr note retraced a portion of yesterday's advance while the long bond registered a modest gain. Treasuries began the day with losses, hitting lows in response to an above-consensus Retail Sales report for November (actual: 0.8%; Briefing.com consensus: 0.3%). However, the post-data selling was absorbed with ease, as 5s, 10s, and 30s climbed into the afternoon while the 2-yr note remained near its morning low. The relative strength in the long bond exerted pressure on the 2s30s spread, which compressed to 91 bps from yesterday's 94 bps. The 2s10s spread tightened one basis point to 55 bps.
  • Yield Check:
    • 2-yr: +1 bp to 1.80%
    • 5-yr: +2 bps to 2.13%
    • 10-yr: UNCH at 2.35%
    • 30-yr: -2 bps to 2.71%
  • News:
    • Senator Orrin Hatch said that the temporary individual tax cut may be made even more temporary, expiring at the end of 2024 instead of 2025.
    • Retail sales increased 0.8% (Briefing.com consensus +0.3%) on top of an upwardly revised 0.5% increase (from +0.2%) in October. Excluding autos, retail sales jumped 1.0% (Briefing.com consensus +0.6%) on top of an upwardly revised 0.4% increase (from +0.1%) for October.
      • The key takeaway from the report is that there was healthy spending activity across discretionary categories, which is consistent with a consumer feeling good about their income prospects.
      • Core retail sales, which exclude auto, building material, gasoline station, and food services sales, increased 0.8%, which will be a positive (and upbeat) input for Q4 GDP forecasts
    • Initial claims for the week ending December 9 decreased by 11,000 to 225,000 (Briefing.com consensus 239,000) while continuing claims for the week ending December 2 dropped by 27,000 to 1.886 million.
      • The latest week marks the 145th straight week initial claims have been below 300,000
    • Import prices increased 0.7% in November, led by a 7.6% increase in fuel import prices, while export prices increased 0.5%, paced by a 0.6% jump in prices of nonagricultural export prices.
      • The monthly gain left import prices up 3.1% year-over-year, versus up 0.2% for the 12 months ending November 2016, and export prices up 3.1% year-over-year, versus down 0.2% for the 12 months ending November 2016.
      • Excluding fuel, import prices were flat in November. Excluding agriculture, export prices increased 0.6%
    • Total business inventories declined 0.1% in October, as expected, after being unchanged in September. Total business sales increased 0.6% after an upwardly revised 1.6% increase (from 1.4%) for September.
      • The key takeaway from the report is that sales growth is outpacing inventory growth, which is a step toward regaining some pricing power.
  • Commodities:
    • WTI crude: +0.7% to $57.00/bbl
    • Gold: +0.7% to $1257.20/ozt
    • Copper: +0.7% to $3.07/lb
  • Currencies:
    • EUR/USD: -0.3% to 1.1789
    • USD/JPY: -0.3% to 112.19
  • Data out Friday:
    • December Empire Manufacturing (previous: 19.4) at 8:30 ET
    • November Industrial Production (previous: 0.9%) and Capacity Utilization (previous: 77.0%) at 9:15 ET
    • December net Long-Term TIC Flows (previous: $80.90 billion) at 16:00 ET

10-Yr: -1/32… EUR/USD: 1.1789… USD/JPY: 112.19…

Copyright © 2008 Briefing.com, Inc. All rights reserved.
Sponsor Center
Sponsored Links
Buy a Link Now
Content Partners