Updated: 06-23-2017

The Market at 03:32PM ET
10-Year: +1/32…2.144…
EUR/USD: 1.1197…
USD/JPY: 111.22…

Moving the Market

  • May New Home Sales: Actual 610K, Briefing.com consensus 599K, Prior 593K (revised from 569K)
  • St. Louis Fed President Bullard (non-voter) (11:15 ET)
  • Cleveland Fed President Mester (non-voter) (12:40 ET)
  • Fed Governor Powell (14:15 ET)

03:32PM ET

Yield Curve Ends Week Flatter

  • U.S. Treasuries ended Friday near their best levels of the session after spending the day inside narrow ranges. Session lows were notched in early-morning action and revisited shortly before the release of a better than expected New Home Sales report for May (actual 610K; Briefing.com consensus 599K), which included an upward revision to the April figure (to 593K from 569K). A modest bid persisted into the afternoon, leading the 10-yr note and the 30-yr bond to go out on their highs. The 30-yr bond locked in its fourth consecutive weekly advance while the 10-yr note posted its third consecutive weekly gain. The yield curve flattened during the week, as the 2s10s spread narrowed to 81 basis points from last Friday's 84. The U.S. Dollar Index slipped 0.35% to 97.25 and the S&P 500 (unch) enters the home stretch trading near its flat line.
  • Yield Check:
    • 2-yr: -1 bp to 1.33%
    • 5-yr: -1 bp to 1.75%
    • 10-yr: -1 bp to 2.14%
    • 30-yr: -1 bp to 2.71%
  • News:
    • New home sales were at a seasonally adjusted annual rate of 610,000 in May (Briefing.com consensus 599,000), up 2.9% from an upwardly revised 593,000 (from 569,000) in April and up 8.9% from the same period a year ago.
  • Commodities:
    • WTI crude: +0.6% to $43.01/bbl
    • Gold: +0.5% to $1256.20/ozt
    • Copper: +0.8% to $2.62/lb
  • Currencies:
    • EUR/USD: +0.4% to 1.1197
    • USD/JPY: -0.1% to 111.22
  • Week Ahead:
    • Monday: May Durable Orders (Briefing.com consensus -0.6%) and Durable Orders, ex-transportation (Briefing.com consensus 0.5%) at 8:30 ET
    • Tuesday: June Consumer Confidence (Briefing.com consensus 116.7) at 10:00 ET
    • Wednesday: MBA Mortgage Index at 7:00 ET, May Pending Home Sales (Briefing.com consensus 0.5%) at 10:00 ET, Crude Inventories at 10:30 ET
    • Thursday: Third Estimate of Q1 GDP (Briefing.com consensus 1.2%), GDP Deflator (Briefing.com consensus 2.2%), Initial Claims (Briefing.com consensus 241,000), and Continuing Claims at 8:30 ET. Natural Gas Inventories at 10:30 ET
    • Friday: May Personal Income (Briefing.com consensus 0.3%), Personal Spending (Briefing.com consensus 0.1%), core PCE Prices (Briefing.com consensus 0.1%) at 8:30 ET, June Chicago PMI (Briefing.com consensus 57.8) at 9:45 ET, and Final June Michigan Sentiment (Briefing.com consensus 94.7) at 10:00 ET

10-Yr: +1/32… EUR/USD: 1.1197… USD/JPY: 111.22…

02:33PM ET

Dollar Index Slips for Second Consecutive Week

  • The U.S. Dollar Index is lower by 0.4% at 97.24, tracking a 0.2% downtick for the week after recording a slight 0.1% dip last week. This leaves the index in an area that has been well-travelled over the past five weeks. The greenback retreated in morning trade after the release of mostly upbeat European PMI figures, receiving no help from a better than expected U.S. New Home Sales report for May (actual 610K; Briefing.com consensus 599K), which even featured an upward revision to the April figure (to 593K from 569K). The index marked a session low in the late morning, spending the afternoon in a narrow range.
  • EUR/USD: +0.45% to 1.1202
    • Eurozone June Manufacturing PMI 57.3 (expected 56.8; last 57.0) and Services PMI 54.7 (consensus 56.2; last 56.3)
    • Germany's June Manufacturing PMI 59.3 (expected 59.0; last 59.5) and Services PMI 53.7 (consensus 55.5; last 55.4)
    • France's June Manufacturing PMI 55.0 (expected 54.0; last 53.8) and Services PMI 55.3 (consensus 57.0; last 57.2). GDP +0.5% quarter-over-quarter (expected 0.4%; last 0.4%)
    • Italy's April Industrial New Orders -0.7% month-over-month (last -4.3%); -2.2% year-over-year (last 9.2%). April Industrial New Sales -0.5% month-over-month (last 0.4%); +4.0% year-over-year (last 7.2%)
  • GBP/USD: +0.37% to 1.2729
  • USD/CHF: -0.30% to 0.9690
  • USD/JPY: -0.05% to 111.27
    • Japan's June Manufacturing PMI 52.0 (expected 53.4; last 53.1)
  • USD/CNY: UNCH at 6.837
  • USD/INR: -0.16% to 64.48
  • USD/RUB: -0.83% to 59.45
  • USD/TRY: -0.18% to 3.5029
  • USD/BRL: -0.20% to 3.3357
    • Brazil's June Mid-Month CPI +0.16% month-over-month (expected 0.12%; last 0.24%); +3.52% year-over-year (expected 3.48%; last 3.77%)
  • USD/MXN: -0.68% to 17.990
  • USD/CAD: +0.23% to 1.3265
    • Canada's May CPI +0.1% month-over-month (expected 0.2%; last 0.4%); +1.3% year-over-year (consensus 1.5%; last 1.6%). May Core CPI +0.1% month-over-month (last 0.0%); +0.9% year-over-year (last 1.1%)
  • AUD/USD: +0.45% to 0.7575
  • NZD/USD: +0.36% to 0.7291

10-Yr: +1/32… EUR/USD: 1.1202… USD/JPY: 111.27…

01:12PM ET

Drifting Along

  • The Treasury market has seen some modest backtracking in recent action, but that has not changed the overall tone of today's sleepy session. The front end remains modestly higher while the 10-yr note and the 30-yr bond are both slightly down. Given the current state of affairs, the yield curve will end the week flatter than it began. Since last Friday, the 2s10s spread has narrowed by 3 bps to 81 bps after falling eight basis points last week. Elsewhere, the S&P 500 (+0.2%) continues defending a slim gain while crude oil has returned to its flat line, trimming today's advance to just 0.1% at $42.80/bbl.
  • Yield Check:
    • 2-yr: UNCH at 1.34%
    • 5-yr: UNCH at 1.76%
    • 10-yr: +1 bp to 2.15%
    • 30-yr: +1 bp to 2.72%

10-Yr: -2/32… EUR/USD: 1.1146… USD/JPY: 111.27…

12:03PM ET

PMIs Raise Questions: The Dollar Index is trading lower this morning (97.27) as it gives up some recent gains. It is sitting on 20-sma at the moment. Economic data was mixed this morning with the Markit Manufacturing preliminary look missing expectations and the New Home Sales beating. At the moment, the area just below 98 is holding resistance as some questions arise about the next direction of the Fed. Fed Chair Janet Yellen speaks next Tuesday with participants watching closely to see if she waivers from her hawkish tone.

  • The euro is back to probing the 1.12 level for resistance. Manufacturing PMIs from the region were light of expectations which is raising questions that the current recovery may be slowing down.
  • The pound is bouncing off the 100-sma (1.2632) as Brexit negotiations get under way. Today marks the one year anniversary of the Brexit vote and ironically is the first set of headlines we are seeing from the UK and EU negotiations. Early indications are the two sides are off to a rocky start but it is having little impact on cable at the moment.
  • The yen is riding its 50-sma (111.20) and holding just below its 200-sma (110.89). The preliminary look at June Manufacturing PMI ran lower than expected.
  • The yuan continues to see a slow sell off as it drops to 6.84. This marks its lowest level since May 26.

10-Yr: Unch… EUR/USD: 1.1197… USD/JPY: 111.26…

11:23AM ET

Reclaiming Losses

  • U.S. Treasuries have seen some buying interest in recent action, which has lifted the complex to its best level of the day, leaving only the 30-yr bond with a slim loss on the day. Treasuries slid from their highs in reaction to an above-consensus New Home Sales report for May (610K; Briefing.com consensus 599K), but that retreat was short-lived.
  • Looking at other markets, the S&P 500 (+0.2%) holds a modest gain while crude oil (+0.9% to $43.11/bbl) sits on its session high.
  • Yield Check:
    • 2-yr: UNCH at 1.34%
    • 5-yr: -1 bp to 1.75%
    • 10-yr: UNCH at 2.15%
    • 30-yr: UNCH at 2.72%

10-Yr: UNCH… EUR/USD: 1.1202… USD/JPY: 111.25…

10:14AM ET

Treasuries Trade Mostly Lower

  • The yield curve is steepening a touch this morning following the release of a better-than-expected New Home Sales report for May. The S&P 500 is unchanged at 2,434.5 and the U.S. Dollar Index is down 0.28% to 97.32. Gold is up 0.62% at $1,257.2/troy oz. and WTI crude is higher by 0.63% at $43.00/bbl.
  • U.S. new home sales ran at a seasonally adjusted annual rate of 610K in May, beating out the Briefing.com consensus for a SAAR of 599K. April's pace was revised up to 593K from 569K
    • The median selling price jumped 16.8% y/y to a record $345,800
  • The IHS Markit Composite PMI fell to 53.0 in June (prior 53.6)
    • The manufacturing PMI dropped to 52.1 from 52.7 (nine-month low)
  • Yield Check:
    • 2-yr: unch at 1.35%
    • 5-yr: unch at 1.76%
    • 10-yr: +1 bp to 2.16%
    • 30-yr: +2 bps to 2.73%

10-Yr: -3/32… EUR/USD: 1.1191… USD/JPY: 111.30…

09:16AM ET

New Home Sales on Deck

  • The U.S. Treasury market has retreated this morning and now trades in negative territory as the S&P 500 gets set to open up two points at 2,436.7. The U.S. Dollar Index is losing 0.19% at 97.41 and WTI crude is up 0.16% at $42.81/bbl. Gold is up 0.68% to $1,257.9/troy oz.
  • We mentioned on Thursday that an exemption for banks' Treasury holdings for the calculation of the Supplementary Leverage Ratio (SLR) could increase demand for government bills, notes, and bonds. The Treasury department recently proposed that Treasuries and cash held at central banks should be exempted when calculating that ratio for the purposes of financial regulation. Deutsche Bank now suggests that such a change could generate $2 tln of new liquidity, although said regulatory changes would probably not be implemented until the summer of 2018. More from Bloomberg
  • Yield Check:
    • 2-yr: unch at 1.35%
    • 5-yr: unch at 1.76%
    • 10-yr: +1 bp to 2.16%
    • 30-yr: +2 bps to 2.73%

10-Yr: -2/32… EUR/USD: 1.1181… USD/JPY: 111.30…

08:38AM ET

Eurozone PMIs Miss but Still Indicate Strong Growth

  • Preliminary readings for the eurozone purchasing managers' indices were released earlier this morning and the data was weaker than expected, on balance, but not enough to indicate a significant slowdown in the eurozone recovery. Despite a significant widening and broadening of the eurozone recovery since the beginning of this year, the 10-year German bund yield is 25 basis points off of its high yield of 0.51%. Part of this can be explained by the year-on-year oil price growth that was inevitably going to drop sharply in the middle of this year if oil prices did not double again, as they did between February 2016 and February 2017. Part of it can be explained by the EUR60 bln/month of asset purchases by the European Central Bank. Core inflation in the single currency bloc now looks to be contained below 1% (as opposed to the ECB target of "at or below 2%"). The German 10-year yield continues to flirt with its 200-day moving average at 0.26%. One year on from the 2016 Brexit referendum, the U.K.'s 10-year gilt is yield is trading at roughly the same level as the day after the vote 
  • European Economic Data:
    • The eurozone's manufacturing PMI unexpectedly jumped to 57.3 in June (prior 57.0)
      • The services PMI fell more than expected to 54.7 (prior 56.3)
    • Germany's manufacturing PMI fell less than expected to 59.3 in June (prior 59.5)
      • Germany's services PMI unexpectedly dropped to 53.7 in June (prior 55.4)
    • France's manufacturing PMI jumped more than expected to 55.0 for June (prior 53.8)
      • France's services PMI fell more than expected to 55.3 in June (prior 57.2)
    • French GDP growth for Q1 was revised up to 0.5% q/q from the prior estimate of 0.4% q/q. Q4 growth was 0.4%
    • Italian industrial new orders were down 0.7% m/m in April (-2.2% y/y) after a 4.3% drop in March
      • Industrial sales were down 0.5% m/m in April (+4.0% y/y), reversing all of March's 0.4% growth
  • Yield Check:
    • France, 10-yr OAT: unch at 0.60%
    • Germany, 10-yr bund: unch at 0.25%
    • Greece, 10-yr note: -5 bps to 5.45%
    • Italy, 10-yr BTP:  +1 bp to 1.91%
    • Portugal, 10-yr PGB: unch at 2.91% 
    • Spain, 10-yr ODE: +1 bp to 1.38%
    • U.K., 10-yr gilt: +1 bp to 1.03%

10-Yr: -1/32… EUR/USD: 1.1178… USD/JPY: 111.25…

07:47AM ET

Treasuries Tick Lower Ahead of New Home Sales

  • U.S. Treasuries are ticking lower this morning ahead of the release of new home sales data for May. Overnight, the purchasing managers' indices in the eurozone and Japan came out weaker than expected but the surveys still indicated robust growth in both the manufacturing and service sectors. The S&P 500 is set to open unchanged at 2,434.4 and the U.S. Dollar Index is losing 0.19% to 97.40. Gold is adding 0.72% at $1,258.4/troy oz. and WTI crude is higher by 0.37% at $42.90/bbl.
  • Yield Check:
    • 2-yr: unch at 1.34%
    • 5-yr: unch at 1.76%
    • 10-yr: +1 bp to 2.16%
    • 30-yr: +1 bp to 2.72%
  • International News:
    •  Japan's manufacturing purchasing managers' index unexpectedly fell to 52.0 in June (prior 53.1)
    • The eurozone's manufacturing PMI unexpectedly jumped to 57.3 in June (prior 57.0)
      • The services PMI fell more than expected to 54.7 (prior 56.3)
    • Italian industrial new orders were down 0.7% m/m in April (-2.2% y/y) after a 4.3% drop in March
  • Data out Friday:
    • May New Home Sales (10:00 ET)
  • Fed Speakers:
    • St. Louis Fed President Bullard (non-voter) (11:15 ET)
    • Cleveland Fed President Mester (non-voter) (12:40 ET)
    • Fed Governor Powell (14:15 ET)

10-Yr: -2/32… EUR/USD: 1.1171… USD/JPY: 111.25…

03:10PM ET

Treasuries Squeeze Higher

  • U.S. Treasuries rallied today, with the gains shared broadly across the yield curve, as the 30-year yield touched a fresh seven-month low (prices move inversely to yields). The Treasury bill market, comprising debt with maturities shorter than one year, saw unusual buying interest due to potential regulatory changes and hoarding on debt ceiling concerns. The U.S. economic data releases were minor but the Leading Economic Index improved as expected and the $5 bln 30-year TIPS auction was met with strong demand. St. Louis Fed President James Bullard said that his colleagues are "unnecessarily aggressive" in their forecasts for future tightening. He is a dove and does not vote on the FOMC. The S&P 500 now trades up 0.21% to 2,440.7 and the U.S. Dollar Index is adding 0.02% at 97.58
  • Yield Check:
    • 2-yr: -1 bp to 1.34% 
    • 5-yr: -2 bps to 1.76% 
    • 10-yr: -1 bp to 2.15%
    • 30-yr: -1 bp to 2.72%
  • News:
    • The Conference Board's Leading Economic Index increased 0.3% in May, as expected, following a downwardly revised 0.2% increase (from 0.3%) in April. May marked the ninth consecutive increase for LEI
    • Initial jobless claims rose to 241K during the week ending June 17 from the prior week's reading of 238K. The Briefing.com consensus was 240K
      • Continuing claims rose to 1944K during the week ending June 10 from the prior reading of 1936K
      • The week ending June 17 covered the survey period for the June employment report
    • The FHFA Housing Price Index was up 0.7% m/m in April (6.8% y/y), slightly faster than March's 0.6% m/m gain (6.2% y/y)
    • St. Louis Fed President James Bullard said today that the FOMC participants' projections that the fed funds rate will rise to 3% by the end of 2019 are "unnecessarily aggressive". Bullard is a dove and a non-voter
    • $5 bln 30-year TIPS auction
      • High yield: 0.880%
      • Bid-to-cover: 2.83
      • Indirect bid: 76.1%
      • Direct bid: 8.4%

  • Commodities:
    • WTI crude: +0.49% to $42.74/bbl.
    • Gold: +0.38% to $1,250.5/troy oz.
    • Copper: -0.21% to $2.597/lb.
  • Currencies:
    • EUR/USD: -0.19% to 1.1148
    • USD/JPY: -0.03% to 111.34
  • Data out Friday:
    • May New Home Sales (10:00 ET)
  • Fed Speakers:
    • St. Louis Fed President Bullard (non-voter) (11:15 ET)
    • Cleveland Fed President Mester (non-voter) (12:40 ET)
    • Fed Governor Powell (14:15 ET)

10-Yr: +4/32… EUR/USD: 1.1148… USD/JPY: 111.34…

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