The Market at 03:33PM ET
Moving the Market
FHFA Housing Price Index: Actual 0.6%, prior 0.5% (revised 0.4%)
Existing Home Sales: Actual 4.59M, consensus 4.60M, prior 4.60M
Treasury auctions $32B 2y notes, draws 0.447%
Treasuries Finish Mixed:
- Treasuries finished mixed amid a subdued session.
- The complex pared its overnight gains as U.S. equity markets saw a strong bid at the open.
- Trade slipped into the red after the improvement in the FHFA Housing Price Index (0.6%), and dipped to its worst levels following the in-line existing home sales (4.59M actual v. 4.6M expected).
- A late-morning bid would drop yields back onto their respective flat lines ahead of the disappointing $32B 2y note auction.
- The auction drew 0.447% and an in-line 3.35x bid/cover. Both indirect (23.3%) and direct (18.9%) takedowns were light, leaving primary dealers with 47.8% of the supply.
- A choppy post-auction trade took hold, causing yields to hover in a tight range over the remainder of the session.
- Outperformance at the long end pushed the 30y down -2.2bps to 3.503%. The yield on the long bond approached 3.550% resistance during this morning's sell off, but was unable to puncture the level.
- The 10y edged up +0.5bps to 2.726%. The benchmark yield settled today's session on its 200 dma.
- The 5y lagged, climbing +2.3bps to 1.746%. Selling in six of the past seven sessions has caused the yield to climb +20bps, setting up a potential retest of the September/March highs near 1.800%.
- A flatter curve took hold as the 5-30-yr spread narrowed to 175.5bps, its flattest since the fall of 2009.
- A mixed session for precious metals saw gold slip -$5 to $1283 and silver add +$0.06 to $19.41.
- Data: MBA Mortgage Index (7) and new home sales (10).
- Auction: $35 bln 5y notes.
Dollar Drifts Little Changed:
- The Dollar Index hovers little changed amid a rather uneventful trade.
- Early weakness dropped the Index onto the 79.80 level before buyers emerged and ran action back up to the 79.95 flat line.
- EURUSD is +5 pips @ 1.3800 as action continues to press support in the area that is helped by the 50 dma. The single currency has spent much of the past week in the area as a sleepy trade took hold over the holidays. However, action should pick up tomorrow as Flash Manufacturing and Services PMI data from around the region will be released.
- GBPUSD is +35 pips @ 1.6825 as trade looks likely to put in its best close since November 2009. Sterling continues to benefit from expectations the Bank of England will be the first major Western central bank to hike rates and emerge from the financial crisis. Tomorrow, the BOE's MPC votes accompany public sector net borrowing and CBI Industrial Order Expectations.
- USDCHF is flat @ .8850 as trade fights for a seventh day of gains. Early selling provided a test of the 50 dma (.8837), but support in the area was able to hold. Fluctuations in the pair remain a derivative of the euro thanks to the Swiss National Bank's EURCHF 1.2000 floor.
- USDJPY is flat @ 102.60 as trade steadies following seven days of gains. A Nikkei report from last week has sparked this recent move into risk assets as it suggested the Bank of Japan may look to increase its asset purchase program due to the slowing of the Japanese economy. It should be noted that BOJ Governor Kuroda as twice pushed back against any such action, suggesting inflation is likely to rise as wage growth takes hold. The 102.50 area remains a key pivot.
- AUDUSD is +40 pips @ .9365 as buyers take control for the first time in four sessions. Notable were overnight comments from Australian Treasurer Hockey, which voiced concerns over the Reserve Bank of Australia's neutral stance on rates despite the strong Aussie dollar. Any close above .9415 would be the best in five months. Australia's CPI and Trimmed Mean CPI are due out tonight. Chinese data is limited to HSBC Flash Manufacturing PMI.
- USDCAD is +15 pips @ 1.1025 as action continues to test resistance in the area. Early action saw the pair dip into the red, but trade has managed to rebound despite the better than expected Canadian wholesale sales (1.1% actual v. 0.7% expected) data.
- Treasuries are seeing little reaction to the disappointing $32 bln 2y note auction.
- The auction drew 0.447% and an in-line 3.35x bid/cover.
- Both indirect (23.3%) and direct (18.9%) takedowns were light, leaving primary dealers with 57.8% of the supply.
- Outperformance at the long end has the 30y -1.1bps @ 3.514%.
- A +1bp advance in the 10y has action near 2.730%. Action continues to flirt with the 200 dma, which lurks in the vicinity.
- Selling in the belly has the 5y +2.5bps @ 1.748%. Participants continue to monitor the 1.800% area, which is home to both the September and March highs.
- A flatter yield curve has taken hold with the 5-30-yr spread tightening to 176.5bps.
Auction Up: $32 bln 2y note auction draws 0.447%, 3.35x bid/cover, 23.3% indirect bidders, 18.9% direct bidders
Treasuries are seeing little initial reaction to the somewhat disappointing 2y auction.
$32B 2y Note Auction Preview:
- Previous auction drew 0.469%, 3.20x bid/cover, 40.9% indirect bidders, 21.5% direct bidders
- 12-auction averages: 0.348%, 3.32x bid/cover, 27.4% indirect bidders, 22.0% direct bidders
Markets Await Preliminary PMI Data: The Dollar Index stretched to 79.97, falling just short of a test of the key 80.00 psyche resistance level. The greenback is in favor, but is showing signs of faltering on tests of key resistance levels as the 20 sma (79.92) and 50 sma (79.96) also sit in this area. Housing data from today was generally in-line with expectations with a small beat on home prices and a small miss on existing home sales.
- The euro is slightly higher on the day, but has been unable to hold ground above 1.3800. European markets are open today and volume is returning, but news was very light in the region. Market focus will turn to tomorrow's preliminary PMI Manufacturing and Services numbers.
- The pound remains strong and is holding 1.6800. Tomorrow will be the release of the BoE minutes from its last meeting, which will discuss the vote and participant outlook. One potential headwind is if the central bank expands on commentary from its last minutes which it discussed the negative impact a stronger pound has on trade.
- The yen remains weak but is holding up generally well given the risk appetite in equity markets. Yen has been able to hold its ground in the low 102 area, but so far has shown no signs of being able to recover some of its recent lost ground.
Treasuries Hold Near Lows:
- Treasuries remain near session lows following the in-line existing home sales (4.59 mln actual v. 4.60 mln expected).
- Steady selling over the course of the morning has erased the overnight gains, and maturities across the complex now hold small losses.
- The early weakness is having the biggest impact on the belly as yields there are +1.5bps.
- The 5y holds at a two-week high near 1.740%. Traders remain focused on the 1.800% area as the September and March highs lurk in the vicinity.
- The 10y is probing the 200 dma as action has ticked up to 2.735%. Selling over the past five sessions has run the benchmark yield off the key 2.600% level.
- Slight outperformance at the long end has the 30y +0.5bps @ 3.530%. Recent action has made several attempts at reclaiming the 3.550% level, but sellers remain unsuccessful in their efforts.
- An unchanged curve has the 5-30-yr spread stuck at 179.5bps.
- Precious metals are now mixed with gold flat @ $1288 and silver +$0.07 @ $19.42.
- Attention now turns to this afternoon's $32 bln 2y note auction.
Dollar Slips in Early Action:
- The Dollar Index trades fractionally lower as trade presses the 79.80 level.
- Overnight action saw the Index test 80.00, but sellers once again succeeded in their efforts to keep action below the level.
- EURUSD is +25 pips @ 1.3820 as trade sees another bounce off 1.3800 support that is helped by the 50 dma. Data remained absent from the region; however, there was more chatter from officials. The ECB's Coeure became the latest member to suggest the central bank has 'further room to cut rates.'
- GBPUSD is +30 pips @ 1.6820 as trade looks to post its best close since November 2009. The 1.6800 area is home to near-term support with 1.6700 being the far more important level.
- USDCHF is -15 pips @ .8835 as trade slips amid euro strength. Today's selling has the pair lower for the first time in seven sessions, and has dropped action back below the 50 dma. A breakdown of .8750 puts the March lows back in play.
- USDJPY is -5 pips @ 102.55 as sellers look to take control for the first time in eight sessions. The recent win streak has come amid chatter the Bank of Japan will need to up its asset purchase program because of the recent weakness in the Japanese economy. The 102.50 area remains a key pivot to monitor.
- AUDUSD is +35 pips @ .9355 following comments from Australian Treasurer Joe Hockey voicing his concerns over the Reserve Bank of Australia's neutral stance on rates despite the strength of the Aussie dollar. Any close above .9415 would be the best in five months. USDCNY ticked up to 6.2349, a fresh 14-month high. Notable were headlines out overnight indicating the People's Bank of China lowered its reserve requirement ratio by 2% for rural financial institutions.
- USDCAD is +5 pips @ 1.1015 as action struggles at resistance in the area. Canada's wholesale sales are due out later this morning.
Treasuries Edge Up in Overnight Trade:
- Treasuries hold small gains as a quiet overnight trade nears the cash open.
- Yields were once again limited to a tight 3bp range during early trade.
- The 5y holds -0.7bps @ 1.716% as action makes another run at 1.700% support.
- The 10y is off -1.8bps @ 2.707%. The benchmark yield has struggled to retake the 200 dma (2.727%) as many remain focused on the 2.680% pivot.
- At the long end, the 30y trades -1.4bps @ 3.511%. Many traders continue to monitor 3.550% resistance as it previously served as key support.
- A slightly flatter curve has taken hold as the 5-30-yr spread trades tighter @ 179.5bps.
- Precious metals are firm with gold +$3 @ $1292 and silver +$0.17 @ $19.52.
- Data: FHFA Housing Price Index (9) and existing home sales (10).
- Auction: $32 bln 2y notes.
Treasuries Finish Flat:
- Treasuries finished flat amid a subdued session.
- The complex opened with small gains, ticking to its best levels following the in-line leading indicators (0.8%).
- However, maturities would give up those gains as equities saw a steady climb over the course of the session.
- Light buying dropped the 5y -0.8bps to 1.723%. The bid pushed the yield lower for the first time in five sessions, but trade was able to hold 1.700% support.
- The 10y ended unchanged @ 2.721%. The benchmark yield held near two-week highs after a morning bid was unable to press action below the 2.680% pivot.
- The 30y lagged slightly, edging up +0.8bps to 3.525%. Many traders continue to look for a test of the 3.550% level, where previous support is now resistance.
- A slightly steeper curve developed as the 5-30-yr spread widened to 180bps.
- Precious metals lost ground as gold fell -$5 to $1289 and silver shed -$0.22 to $19.37.
- Data: FHFA Housing Price Index (9) and existing home sales (10).
- Auction: $32 bln 2y notes.
Dollar Fights to Retake 80.00:
- The Dollar Index clings to small gains as trade threatens to retake the 80.00 level.
- Today's action has been lackluster as banks across Europe were shuttered for the Easter holiday.
- EURUSD is -15 pips @ 1.3790 as action presses session lows. Today's losses have the single currency lower for the sixth time in seven sessions and testing key support in the area that is defended by the 50 dma.
- GBPUSD is +10 pips @ 1.6800 as trade lingers near its best levels since November 2009. A sleepy session has seen action limited to a 40 pip range with that shrinking to just 20 pips during the U.S. session.
- USDCHF is +20 pips @ .8850 as buyers remain in control for a sixth session. Today's bid has run the pair back above its 50 dma, but trade will have to retake .8800/.8840 resistance before the bulls can breathe a bit easier.
- USDJPY is +15 pips @ 102.60 as trade gains for a seventh day. The pair found a bid after Japan posted its largest March trade deficit (JPY1.71 trln) on record, which was a result of a 1.8% rise in exports and 18.1% jump in imports. The disappointing data has some pricing in the potential for the Bank of Japan to up its QE program as the Japanese economy continues to flash signs of a slowdown.
- AUDUSD is +5 pips @ .9335 amid an uneventful trade. The recent highs near .9400/.9425 remain under close scrutiny. Australia's CB Leading Index is due out tonight.
- USDCAD is -5 pips @ 1.1015 as trade struggles near the April highs. Many traders have the 1.1050 level on their radars as a breakout through resistance helped by the 50 dma puts the March highs near 1.1250 back in play. Canadian data is limited to wholesale sales.