Updated: 08-28-2015

The Market at 03:40PM ET
10-Year: +1/32…2.18…
EUR/USD: 1.1184…
USD/JPY: 121.36…

Moving the Market

  • St. Louis Fed President James Bullard (hawk and non-FOMC voter) speaks to Bloomberg News: Says biggest concern is lower inflation, believes that Interest on Excess Reserves (IOER) will be effective in tightening monetary conditions
  • July Personal Income: Actual +0.4%, Briefing.com Consensus 0.4%, Prior 0.4%
  • July Personal Spending: Actual 0.3%, Briefing.com Consensus 0.4%, Prior 0.3% (revised from 0.2%)
  • July PCE Prices - Core: Actual 0.1%, Briefing.com Consensus 0.1%, Prior 0.1%
  • Speaking on CNBC, Minneapolis Fed President Kocherlakota (non-FOMC voter) says that market moves are a tail risk for U.S. economy, inflation remains low, 1H 2015 growth not meeting target. True to his dovish form, says inflation outlook justifies further stimulus
  • August Michigan Sentiment - Final: Actual 91.9, Briefing.com Consensus 93.0, Prior 92.9
  • Fed Vice Chair Stanley Fischer says he has a high level of confidence that 2% inflation is on the table but that the Fed still has to watch yuan depreciation

03:40PM ET

Yield Curve Flattens on Fischer Remarks

  • U.S. government debt securities finished today's session mixed, as investors sold 2 and 5-year notes on higher expectations for a September or October rate hike. The Personal Income and Spending data was mixed, while the Treasury market is still trying to handicap the possibility of further sales by the Chinese government to finance its support for the yuan. WTI Crude completed its best two-day rally since 2011. The front-month contract gained 6.51% on the session to $45.33/bbl.
  • Yield Check:
    • 2-yr: +3 bps to 0.72%
    • 5-yr: +2 bps to 1.52%
    • 10-yr: unch at 2.18%
    • 30-yr: -1 bp to 2.91%
  • News:
    • Personal Income grew 0.4% m/m in July, in line with the Briefing.com consensus and the reading from June
    • Personal Spending grew 0.3%, short of the 0.4% Briefing.com consensus but the June number was revised up from 0.2% to 0.3%
    • Core Personal Consumption Expenditure (PCE) Prices climbed 0.1%, in line with the prior reading and the Briefing.com consensus
    • The University of Michigan Consumer Sentiment Index was revised down to 91.9 in the final July reading from a preliminary reading of 92.9. The index is down from 93.1 in June. The Briefing.com consensus was for an upward revision to 93.0
      • The decline in Consumer Sentiment contradicted the spike in the Conference Board's Consumer Confidence Index, which jumped to 101.5 in August, a 6-month high
      • The divergence was likely the result of recent equity market volatility adversely affecting Consumer Sentiment
    • Stanley Fischer, the Vice Chair of the Fed and an FOMC voter, said that "there was a pretty strong case" for September liftoff
  • Commodities:
    • WTI Crude: +6.51% to $45.33/bbl.
    • Gold: +1.02% to $1,134/troy oz.
    • Copper: +0.62% to $2.343/lb.
  • Currencies:
    • EUR/USD: -0.52% to $1.1184
    • USD/JPY: +0.20% to 121.36
  • Data Out Next Week:
    • Monday: August Chicago PMI (09:45 ET)
    • Tuesday: August ISM Index (10:00 ET); July Construction Spending (10:00 ET); Boston Fed President Rosengren (FOMC non-voter) (13:10 ET); August Auto and Truck Sales (17:00 ET)
    • Wednesday: MBA Mortgage Index for the week ended 8/29 (07:00 ET); August ADP Employment Change (08:15 ET); Q2 Productivity and Unit Labor Costs - Rev. (08:30 ET); July Factory Orders (10:00 ET); Crude Inventories for the week ended 8/29 (10:30 ET); September Fed Beige Book (14:00 ET)
    • Thursday: August Challenger Job Cuts (07:30 ET); Initial Jobless Claims for the week ended 8/29 and Continuing Jobless Claims for the week ended 8/22 (08:30 ET); July Trade Balance (08:30 ET); August ISM Services (10:00 ET); Natural Gas Inventories for the week ended 8/29 (10:30 ET); Minneapolis Fed President Kocherlakota (non-FOMC voter) (21:00 ET)
    • Friday: Richmond Fed President Lacker (FOMC voter) speaks on 'The Case Against Further Delay' (08:10 ET); August Employment Situation Report (08:30 ET)

10-Yr: +1/32… EUR/USD: 1.1184… USD/JPY: 121.36…

03:03PM ET

Dollar and Swissy Rally

  • The U.S. Dollar Index added 0.51% to 96.12 today after trading as low as 92.52 on Monday
    • The economic data from the U.S. was mixed with Personal Income meeting the Briefing.com consensus at 0.4% m/m growth, while Personal Spending growth was only 0.3% in July, short of the Briefing.com consensus of 0.4%
    • Many FOMC members spoke in Jackson Hole, Wyoming at the annual symposium run by the Kansas City Fed
      • Stanley Fischer, the Vice Chair of the Fed, made market waves with some hawkish remarks
  • EUR/USD: -0.52% to $1.1183
    • Spain's Consumer Price Index fell 0.4% y/y in August, more than expected. Consumer prices increased by 0.1% in July
    • Germany's Consumer Price Index was flat month-on-month in August. Forecasters had been looking for a decline and the CPI rose 0.2% in July
  • GBP/USD: -0.13% to $1.5289
    • In the U.K., GDP grew 0.7% q/q in the second quarter (and 2.6% y/y), as expected
    • Business Investment jumped a better-than-expected 2.9% q/q in Q2 versus 2.0% growth in Q1
  • USD/JPY: +0.18% to 121.34
    • In Japan, Household Spending grew 0.6% m/m in July, much worse than expected but better than the -3.0% from June
    • The National Core Consumer Price Index was flat y/y in July, better than expected but worse than the 0.1% rise in June
    • Tokyo's Core CPI fell 0.1% in July, better than expected and the same decline as was seen in June
    • Japanese Retail Sales grew a better-than-expected 1.6% y/y in July versus 0.9% growth in June
  • USD/CHF: -0.34% to 0.9630
    • Switzerland's GDP climbed 0.2% q/q in Q2 2015, better than estimates and the 0.2% decline from Q1
  • USD/CAD: +0.18% to 1.3220
    • Canada's Raw Materials Price Index fell 5.9% m/m in July, worse than expected and the change in June of +0.2%    
  • AUD/USD: -0.15% to $0.7163
  • NZD/USD: -0.22% to $0.6464

10-Yr: unch… EUR/USD: 1.1183… USD/JPY: 121.34…

02:24PM ET

Atlanta Fed President Lockhart Talking

  • 2's/10's has narrowed by 4 bps and 5's/30's has come in by 3bps as we finish up a very volatile trading week. With the S&P 500 seeming to have settled in just barely above its January-July range, 2-year note investors are less confident that market volatility will delay Fed tightening much longer
  • Lockhart (hawk and FOMC voter):
    • "Crisis and lower petroleum prices have to be evaluated on the basis of their effect on the broader economy, the mainstreet economy"
    • "The trend [of the economy] is a very positive one...we have come a long way"
    • "50/50 chance of a rate hike at the next meeting is a good assessment"
    • "October is a live meeting, it's in play"
  • Yield Check:
    • 2-yr: +4 bps to 0.73%
    • 5-yr: +2 bps to 1.52%
    • 10-yr: -1 bp to 2.18%
    • 30-yr: -2 bps to 2.90%

10-Yr: unch… EUR/USD: 1.1185… USD/JPY: 121.35…

01:02PM ET

Treasuries Mixed After Fischer Remarks

  • The yield curve steepened this morning after Fed Vice Chair Stanley Fischer made hawkish remarks in an interview with CNBC
    • He said that reports about the economy have "been impressive and the economy is returning to normal"
    • Rebounding commodity prices, if they continue, could help the Fed's confidence that inflation will return to its 2% target
  • The FOMC's next meeting is on September 16th and 17th
  • Dennis Lockhart, president of the Atlanta Federal Reserve, will speak at 14:15 ET
  • Yield Check:
    • 2-yr: +1 bp to 0.70%
    • 5-yr: +1 bp to 1.51%
    • 10-yr: -1 bp to 2.17%
    • 30-yr: -3 bps to 2.89%

10-Yr: +3/32… EUR/USD: 1.1182… USD/JPY: 121.34…

11:51AM ET

2 and 5-Year Notes Go Red

  • U.S. Treasuries have given up their morning rally after Stanley Fischer, the Vice Chair of the FOMC, said that it's too soon to tell if the recent market volatility has made a September hike more or less compelling
    • He went on to say that he has a high level of confidence that 2% inflation is on the table but that the Fed still has to watch yuan depreciation
    • Fischer said "there was a pretty strong case" for September liftoff
  • Yield Check:
    • 2-yr: +2 bps to 0.71%
    • 5-yr: +1 bp to 1.51%
    • 10-yr: -1 bp to 2.18%
    • 30-yr: -2 bps to 2.90%
  • The 10-year note yield found support this morning at its downtrend from 2014 (yields move inversely to price). The level has been whipsawed over several times, so this is more of a guideline than a reliable support level. If the Treasury bulls were firmly in control, however, they should have been able to hold the market below that area, which coincides with the 200-day moving average at 2.13%
  • 10-Year Yield Daily Chart (Zoomed Out): 

  • 10-Year Yield Daily Chart (Zoomed In):

10-Yr: +1/32… EUR/USD: 1.1171… USD/JPY: 121.26…

11:24AM ET

Jackson Hole Moves Into Focus: The Dollar Index is grinding back towards the 96 level. The DXY saw some overnight selling that had it dip to 95.40 before finding support. It has been in a steady upward trend in the hours since and is now heading towards a test of 96 resistance. Economic data continued to run in line to slightly below expectations with Personal Income & Spending, PCE Prices and Michigan Sentiment being the latest numbers to fall into that category. Focus for FX traders will be on this weekend's Jackson Hole conference with the topics being inflation and monetary policy.

  • The euro is bouncing around in the 1.12-1.13 area today. This is shaping up to be a consolidation area for the single currency. German CPI numbers came in slightly higher than expected but remain extremely low. Consumer and Business surveys in the region were mixed to slightly better.
  • The pound remains offered as it has now given up approx 2% of value over the past four sessions. Sterling is now testing its 200 sma (1.5367). The Q2 GDP was revised on a y/y basis to 2.6% from 2.9% which was expected. But it is helping provide further selling pressure on cable at the moment.
  • The yen continues to bounce back from the rally earlier in the week. The yen saw a quick spike into the 116 level on wild Monday morning trading. But has decline nearly 5% to slip back into the 121 area. Overnight the country saw some positive economic news as Inflation, unemployment and Retail Sales all came in better than expected.

10-Yr: +09/32… EUR/USD: 1.1227… USD/JPY: 121.01…

11:18AM ET

10-Year Leads Rally

  • Stronger commodity prices and recovering equity markets have not prevented the Tplex from making gains this morning. The market is still debating the possibility that China has been selling some of its roughly $1.5 tln Treasury position. There had even been reports that the Chinese government informed U.S. officials prior to making the sales. The reported cause of the selling is that China needs to convert the proceeds (dollars) into yuan to support the currency following its recent quasi-flotation. 
    • WTI crude is up 3.85% to $44.20/bbl.
    • S&P 500: -0.04% to 1,986.82
  • Greece has a new government that will administer the country until the elections
  • Yield Check:
    • 2-yr: -1 bp to 0.68%
    • 5-yr: -2 bp to 1.48%
    • 10-yr: -3 bps to 2.15%
    • 30-yr: -2 bp to 2.90%

10-Yr: +8/32… EUR/USD: 1.1234… USD/JPY: 121.02…

10:26AM ET

Treasuries Hold Higher

  • The University of Michigan Consumer Sentiment Index was revised down to 91.9 in the final July reading from a preliminary reading of 92.9. The index is down from 93.1 in June. The Briefing.com consensus was for an upward revision to 93.0
    • The decline in Consumer Sentiment contradicts the spike in the Conference Board's Consumer Confidence Index, which jumped to 101.5 in August, a 6-month high
    • The divergence is likely the result of recent equity market volatility adversely affecting Consumer Sentiment
    • Lower gasoline price and improvements in labor market conditions likely offset some weakness from equity vol
    • The Current Conditions Index was revised down to 105.1 from 107.1 in the preliminary release
    • The Expectations Index was revised down to 83.4 from 83.8
  • Gold is continuing some of its recent strength, up 1.25% to 1,136.60
  • S&P 500: -0.31% to 1,981.51
  • Yield Check:
    • 2-yr: unch at 0.69%
    • 5-yr: -3 bps to 1.47%
    • 10-yr: -4 bps to 2.15%
    • 30-yr: -4 bps to 2.88%

10-Yr: +10/32… EUR/USD: 1.1233… USD/JPY: 120.99…

09:59AM ET

S&P 500 Futures Decline

  • Treasuries of all maturities have made fresh session highs ahead of the U.S. equity market open
    • St. Louis Fed President James Bullard spoke this morning, but given his non-voting status on the FOMC and his hawkish nature, his expressed eagerness to begin on the path of policy normalization has not dented short term Treasuries
    • Cleveland Fed President Loretta Mester is currently speaking on CNBC
      • She is a non-voter on the FOMC
      • Mester is saying that she is reasonably confident that inflation will return to 2%
      • She says that we are close to full employment
  • U.S. Dollar Index +0.24% to 95.84
  • S&P 500 futures: -0.82% to 1973
  • Yield Check:
    • 2-yr: -2 bps to 0.67%
    • 5-yr: -5 bps to 1.45%
    • 10-yr: -5 bps to 2.13%
    • 30-yr: -6 bps to 2.87%

10-Yr: +15/32… EUR/USD: 1.1248… USD/JPY: 120.90…

08:44AM ET

Treasury Complex Rallies

  • Personal Income grew 0.4% m/m in July, in line with the Briefing.com consensus and the reading from June
  • Personal Spending grew 0.3%, short of the 0.4% Briefing.com consensus but the June number was revised up from 0.2% to 0.3%
  • Core Personal Consumption Expenditure (PCE) Prices climbed 0.1%, in line with the prior reading and the Briefing.com consensus
  • Yields are lower after the release:
    • 2-yr: unch at 0.69%
    • 5-yr: -2 bps to 1.48%
    • 10-yr: -3 bps to 2.15%
    • 30-yr: -4 bps to 2.89%

10-Yr: +10/32… EUR/USD: 1.1272… USD/JPY: 120.75…

08:13AM ET

Sovereign Debt Rallies

  • European government bonds are mostly green this morning, capping off a week that has not been friendly to sovereign debt from the European core. Investors received a raft of data this morning which showed that German inflation was higher than expected, Spanish inflation was lower than expected, and GDP in the U.K. grew in line with estimates during the second quarter
  • Eurozone Consumer Confidence was -7.0 in August, in line with estimates and unchanged from July
    • The Economic Sentiment Indicator (which surveys consumers and businesses) rose to 104.2 for August from 104.0 in July. On a national level, France and Spain improved while Germany, the Netherlands, and Italy all declined
  • Germany's Consumer Price Index was flat month-on-month in August. Forecasters had been looking for a decline and the CPI rose 0.2% in July
    • The German Harmonized Index of Consumer Prices was also flat m/m, defying expectations of deflation
  • In the U.K., GDP grew 0.7% q/q in the second quarter (and 2.6% y/y), as expected
    • Business Investment jumped a better-than-expected 2.9% q/q in Q2 versus 2.0% growth in Q1 
  • Spain's Consumer Price Index fell 0.4% y/y in August, more than expected. Consumer prices increased by 0.1% in July
    • The Harmonized Index of Consumer Prices fell a greater-than-expected 0.5% versus no change in July
  • Yield Check:
    • France, 10-yr OAT: -3 bps to 1.07%
    • Germany, 10-yr Bund: -3 bps to 0.71%
    • Greece, 10-yr note: -2 bps to 8.97%
    • Italy, 10-yr BTP: -1 bp to 1.91%
    • Portugal, 10-yr note: -1 bp to 2.61%
    • Spain, 10-yr ODE: unch at 2.06%
    • U.K., 10-yr Gilt: -5 bps to 1.82%

10-Yr: +9/32… EUR/USD: 1.1274… USD/JPY: 120.84…

07:34AM ET

Treasuries Find Relief Rally Overnight 

  • U.S. Treasuries rallied overnight but are giving back some gains at the moment following a week of significant rises in yields. The yield curve is flattening and equities are slipping back somewhat from Thursday's massive rally. The U.S. Dollar Index is unchanged
  • Yield Check:
    • 2-year: unch at 0.70%
    • 5-year: -1 bp to 1.49%
    • 10-year: -2 bps to 2.16%
    • 30-year: -4 bps to 2.89%
  • International News:
    • Spain's Consumer Price Index fell 0.4% y/y in August, more than expected. Consumer prices increased by 0.1% in July
      • The Harmonized Index of Consumer Prices fell a greater-than-expected 0.5% versus no change in July
    • In the U.K., GDP grew 0.7% q/q in the second quarter (and 2.6% y/y), as expected
      • Business Investment jumped a better-than-expected 2.9% q/q in Q2 versus 2.0% growth in Q1
      • Output per head has finally gotten back to its previous high from Q1 2008
    • In Japan, Household Spending grew 0.6% m/m in July, much worse than expected but better than the -3.0% from June
      • The National Core Consumer Price Index was flat y/y in July, better than expected but worse than the 0.1% rise in June
      • Tokyo's Core CPI fell 0.1% in July, better than expected and the same decline as was seen in June
      • Japanese Retail Sales grew a better-than-expected 1.6% y/y in July versus 0.9% growth in June
  • Data Out Today:
    • July Personal Income, Personal Spending, and PCE Prices - Core (08:30 ET)
    • August Michigan Sentiment - Final (10:00 ET)

10-Yr: +5/32… EUR/USD: 1.1269… USD/JPY: 120.85…

03:38PM ET

Governments Unchanged in Eventful Session 

  • U.S. Treasuries ended today's session mostly unchanged, despite a very strong upward revision to second quarter GDP growth. The $29 bln dollar 7-year note Treasury auction was well-received and the S&P 500 rallied 50 points and then gave back 40 before rallying another 25. WTI crude had its biggest rally in months, climbing back above $40/bbl.
  • Yield Check:
    • 2-yr: unch at 0.68%
    • 5-yr: unch at 1.49%
    • 10-yr: unch at 2.18%
    • 30-yr: -1 bp to 2.92%
  • News: 
    • GDP growth for the second quarter was revised up to 3.7% from the previous estimate of 2.3%. The Briefing.com consensus called for 3.1%
      • The drivers of the upward revision were personal consumption expenditures, nonresidential fixed investment, and private inventories. The latter two in particular made a big difference. With the advance estimate, they contributed negatively to Q2 GDP growth, but with the second estimate, they made a positive contribution of 0.41 and 0.22 percentage points, respectively
      • The GDP Deflator beat expectations too, rising to 2.1% from the prior estimate of 2.0%
    • There were 271K Initial Jobless Claims for the week ended August 22nd, slightly below the consensus of 275K and the prior reading of 277K
      •  Continuing Claims edged up to 2269K from the Briefing.com consensus 2254K in the prior week. The Briefing.com consensus was 2249K
    • July Pending Home Sales missed estimates, rising only 0.5% versus the Briefing.com consensus of 1.0%
    • Overnight, Bloomberg reported that China has reduced its holdings of U.S. Treasuries to use the dollars for currency intervention
    • The $29 bln 7-year note auction was met with strong demand, stopping through by 1 basis point
      • High Yield 1.930%
      • Bid-to-Cover 2.53
      • Indirect Bid 50.8%
      • Direct Bid 14.1%
  • Commodities:
    • WTI crude: +9.56% to $42.49/bbl.
    • Gold: -0.14% to $1,123.00/troy oz.
    • Copper: +3.09% to $2.3175/lb.
  • Currencies:
    • EUR/USD: -0.75% to $1.1252
    • USD/JPY: +0.64% to 120.91   
  • Data Out Friday:
    • July Personal Income, Personal Spending, and PCE Prices - Core (08:30 ET)
    • August Michigan Sentiment - Final (10:00 ET)

10-Yr: unch… EUR/USD: 1.1256… USD/JPY: 120.91…

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