Updated: 06-21-2018

The Market at 10:30AM ET
10-Year: +12/32…2.892…
EUR/USD: 1.1596…
USD/JPY: 109.96…

Moving the Market

-- Weekly Initial Claims (actual 218K; Briefing.com consensus 220K; prior 215K), Continuing Claims (actual 1723K; prior 1701K), and June Philadelphia Fed Survey (actual 19.9; Briefing.com consensus 27.0; prior 34.4)

-- April FHFA Housing Price Index (actual 0.1%; prior 0.2%)

-- May Leading Indicators (actual 0.2%; Briefing.com consensus 0.4%; prior 0.4%)

10:30AM ET

Gains Extended

  • The Treasury market has extended its early gains amid a defensive showing from equities. Thanks to the steady advance, the market has reclaimed its losses from Wednesday, and the 10-yr note is now eyeing yesterday's opening high. Elsewhere, the U.S. Dollar Index is down 0.2% at 94.92, approaching yesterday's session low.
  • Yield Check:
    • 2-yr: -4 bps to 2.53%
    • 5-yr: -4 bps to 2.76%
    • 10-yr: -4 bps to 2.89%
    • 30-yr: -2 bps to 3.04%

10-Yr: +12/32… EUR/USD: 1.1596… USD/JPY: 109.96…

10:14AM ET

Data Recon

  • The Conference Board's Leading Economic Index increased 0.2% in May (Briefing.com consensus +0.4%) following an unrevised 0.4% increase in April. The May increase was driven by positive contributions from seven of the ten indicators that make up the index.
  • The key takeaway from the report is that the strength among the leading indicators remains very widespread.
    • The strongest contributors to the May increase were the ISM New Orders Index (+0.17 percentage points), the interest rate spread (+0.14 pp), and consumer expectations for business conditions (+0.12 pp).
    • The three indicators subtracting from the index were building permits (-0.14 pp), the average manufacturing workweek (-0.13 pp), and average weekly initial claims (-0.06 pp).
    • In the six-month period ending May 2018, the Leading Economic Index increased 3.0%, which was the same rate of growth over the previous six months
    • The Coincident Economic Index increased 0.2% in May following a 0.2% increase in April
    • The Lagging Economic Index increased 0.5% in May after increasing 0.4% in April
  • Yield check:
    • 2-yr: -3 bps to 2.54%
    • 5-yr: -3 bps to 2.77%
    • 10-yr: -3 bps to 2.90%
    • 30-yr: -2 bps to 3.04%

10-Yr: +11/32… EUR/USD: 1.1579… USD/JPY: 110.08…

09:21AM ET

Ticking Higher

  • U.S. Treasuries have seen some modest buying in the early going, which has helped erase a portion of yesterday's losses. Treasuries started the day in negative territory, but a bid developed in short order, lifting prices back into positive territory. It is worth noting that the greenback has shown some volatility this morning with recent selling pressuring the Dollar Index to a session low. The Index is lower by 0.1% at 94.97 after touching another fresh 2018 high in overnight action.
  • Yield Check:
    • 2-yr: -3 bps to 2.54%
    • 5-yr: -1 bp to 2.79%
    • 10-yr: -2 bps to 2.91%
    • 30-yr: -1 bp to 3.05%

10-Yr: +7/32… EUR/USD: 1.1585… USD/JPY: 110.30…

09:18AM ET

Data Recon

  • Initial claims decreased by 3,000 for the week ending June 16 to 218,000 (Briefing.com consensus 220,000).  Continuing claims for the week ending June 9 increased by 22,000 to 1.723 million.
  • If one wanted to extrapolate a concern from the initial claims report, it would be the notion that the low level of initial claims will keep the Fed inclined to raise interest rates.
    • The four-week moving average for initial claims decreased by 4,000 to 221,000
    • The four-week moving average for continuing claims decreased by 4,750 to 1,722,500, which is the lowest level since December 8, 1973
    • Initial claims have held below 300,000 for 172 straight weeks
  • The Philadelphia Fed Index was a bit disappointing, checking in at 19.9 for June (Briefing.com consensus 27.0) versus 34.4 for May.  A number above 0.0, however, still denotes expansion.
  • The key takeaway from the report is that the downturn was led by a sharp pullback in the New Orders Index, which dropped to 17.9 from 40.6, and that the Unfilled Orders Index dropped to -2.7 (first negative reading since January) from 15.3, suggesting firms' backlog diminished. 
    • The Prices Paid Index edged lower to 51.8 from 52.6
    • The Prices Received Index fell to 33.2 from 36.4
  • Yield check:
    • 2-yr: -3 bps to 2.54%
    • 5-yr: -2 bps to 2.78%
    • 10-yr: -2 bps to 2.91%
    • 30-yr: -1 bp to 3.05%

10-Yr: +7/32… EUR/USD: 1.1586… USD/JPY: 110.30…

08:25AM ET

Italy Lags

  • European debt trades mixed with Italian issues underperforming notably. Weakness in Italian BTPs has driven up the country's 10-yr yield to a one-week high after the appointment of two euroskeptics to important government posts. Alberto Bagnai was named head of the Senate Finance Committee while Claudio Borghi was named the head of the Budget Committee in the lower house. Two regional central banks released their latest policy statements, but neither the Bank of England nor the Swiss National Bank called for changes to current policy. That said, dissenters at the Bank of England have grown louder, as three policymakers called for a June hike after only two members voted for a rate increase at the last meeting.
  • European Economic Data:
    • UK's May Public Sector Net Borrowing GBP3.36 billion (expected GBP5.10 billion; last GBP5.27 billion)
    • France's June Business Survey 110 (expected 108; last 109)
    • Swiss May trade surplus CHF2.76 billion (expected CHF1.89 billion; last surplus of CHF2.25 billion)
  • Yield Check:
    • France, 10-yr OAT: +1 bp to 0.71%
    • Germany, 10-yr bund: -1 bp to 0.36%
    • Greece, 10-yr note: -5 bps to 4.32%
    • Italy, 10-yr BTP: +11 bps to 2.68%
    • Portugal, 10-yr PGB: +4 bps to 1.79%
    • Spain, 10-yr ODE: +4 bps to 1.29%
    • U.K., 10-yr gilt: +3 bps to 1.33%

10-Yr: +3/32… EUR/USD: 1.1545… USD/JPY: 110.54…

08:03AM ET

Set for Flat Start

  • U.S. Treasuries are on track for a flat start after enduring a quiet overnight session. Treasury futured edged higher as attention turned from Asia to Europe, but the modest gains have been mostly erased in recent trade. The leader of IMF's delegation to Japan Paul Cashin said Japan needs to increase its consumption tax to 15.0% and cut social security spending to curb unsustainable debt. Elsewhere, China's state-run Global Times reported that the country could act against Dow-listed U.S. companies if trade tensions worsen.
  • Yield Check:
    • 2-yr: -1 bp to 2.56%
    • 5-yr: UNCH at 2.80%
    • 10-yr: UNCH at 2.93%
    • 30-yr: UNCH at 3.06%
  • News:
    • South Korea's May PPI +0.2% month-over-month (last 0.1%); +2.2% year-over-year (last 1.7%)
    • New Zealand's Q1 GDP +0.5% quarter-over-quarter, as expected (last 0.6%); +2.7% year-over-year, as expected (last 2.9%). Q1 GDP Expenditure +0.3% quarter-over-quarter (expected 0.1%; last 0.4%)
    • Hong Kong's May CPI +2.1% year-over-year (last 1.9%)
  • Data out Today:
    • Weekly Initial Claims (Briefing.com consensus 220K; prior 218K), Continuing Claims (prior 1697K), and June Philadelphia Fed Survey (Briefing.com consensus 27.0; prior 34.4) at 8:30 ET
    • April FHFA Housing Price Index (prior 0.1%) at 9:00 ET
    • May Leading Indicators (Briefing.com consensus 0.4%; prior 0.4%) at 10:00 ET
    • Weekly natural gas inventories (prior +96 bcf) at 10:30 ET

10-Yr: +1/32… EUR/USD: 1.1540… USD/JPY: 110.53…

03:17PM ET

Treasuries Surrender Tuesday's Gains 

  • U.S. Treasuries ended Wednesday on a lower, but generally quiet, note. Treasury futures faced some light selling in overnight action, as global equity markets rebounded from yesterday's losses. The modest weakness in Treasury futures was briefly reversed around the start of the cash session, but the opening uptick found resistance in short order. The market retreated through morning trade with longer tenors pausing near intraday levels from Monday. That pause was followed by a slip to fresh lows during the final hour of trade.
  • Yield Check:
    • 2-yr: +2 bp to 2.57%
    • 5-yr: +3 bps to 2.80%
    • 10-yr: +4 bps to 2.93%
    • 30-yr: +3 bps to 3.06%
  • News:
    • Existing home sales decreased 0.4% month-over-month in May to a seasonally adjusted annual rate of 5.43 million (Briefing.com consensus 5.55 million) from a downwardly revised 5.45 million (from 5.46 million) in April. Total sales were 3.0% lower than the same period a year ago and have fallen year-over-year for three straight months.
      • The key takeaway from the report remains the same: notable supply constraints continue to act as a drag on overall sales. The limited inventory -- and the high prices on available inventory -- is crimping affordability, particularly for first-time buyers; moreover, all prospective buyers are feeling affordability pressures from rising mortgage rates and home prices rising faster than income.
    • The Current Account deficit totaled $124.10 billion in the first quarter (Briefing.com consensus -$129.20 billion), up from a revised deficit of $116.10 billion (from $128.20 billion) in the fourth quarter
    • The weekly MBA Mortgage Index increased 5.1% to follow last week's 1.5% decline
  • Commodities:
    • WTI crude: +1.3% to $65.71/bbl
    • Gold: +0.3% to $1274.40/ozt
    • Copper: -0.3% to $3.04/lb
  • Currencies:
    • EUR/USD: UNCH at 1.1580
    • USD/JPY: +0.3% to 110.36
  • A Look to Thursday:
    • Weekly Initial Claims (Briefing.com consensus 220K; prior 218K), Continuing Claims (prior 1697K), and June Philadelphia Fed Survey (Briefing.com consensus 27.0; prior 34.4) at 8:30 ET
    • April FHFA Housing Price Index (prior 0.1%) at 9:00 ET
    • May Leading Indicators (Briefing.com consensus 0.4%; prior 0.4%) at 10:00 ET
    • Weekly natural gas inventories (prior +96 bcf) at 10:30 ET

10-Yr: -8/32… EUR/USD: 1.1580… USD/JPY: 110.36…

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