Moving the Market
MBA Mortgage Index: Actual -4.3%, prior +4.9%
Initial Claims: Actual 313K, consensus 288K, prior 291K (revised 292K)
Continuing Claims: Actual 2316K, consensus 2348K, prior 2330K (revised 2333K)
Durable Orders: Actual 0.4%, consensus -0.6%, prior -1.3% (revised -0.9%)
Durable Orders ex-transportation: Actual -0.9%, consensus 0.5%, prior -0.2% (revised 0.2%)
Personal Income: Actual 0.2%, consensus 0.4%, prior 0.2%
Personal Spending: Actual 0.2%, consensus 0.3%, prior -0.2% (revised 0.0%)
PCE Prices - Core: Actual 0.2%, consensus 0.1%, prior 0.1%
Chicago PMI: Actual 60.8, consensus 63.0, prior 66.2
Michigan Sentiment - Final: Actual 88.8, consensus 90.0, prior 89.4
New Home Sales: Actual 458K, consensus 470K, prior 467K (revised 455K)
Pending Home Sales: Actual -1.1%, consensus 0.5%, prior 0.3% (revised 0.6%)
Treasury auctions $29B 7Y notes, draws 1.960%
Weak Data Pushes Yields to One-Month Lows:
- Treasuries finished near their highs as buyers remained in control for a fourth straight session.
- The complex drifted little changed into the cash open open and rallied throughout the morning as data point after data point missed estimates.
- Yields across much of the curve finished at their lowest levels in a month.
- Initial claims jumped to 313K (288K expected) and durable orders- ex transportation fell -0.9% (+0.5% expected). Personal income was light at +0.2% (+0.3% expected), as was personal spending at +0.2% (+0.4% expected).
- The disappointing data did not stop there as Chicago PMI (60.8 actual v. 63.0 expected), Michigan Sentiment - Final (88.8 actual v. 90.0 expected), new home sales (458K actual v. 470K expected), and pending home sales (-1.1% actual v. 0.5% expected) also missed estimates.
- The complex rallied to session highs ahead of the in-line $29B 7Y note auction. The auction drew 1.960% (1.955%) and a 2.63x bid/cover. Indirect bidders (50.0%) provided support as directs (12.8%) were a bit light. Primary dealers were left with 37.2% of the supply.
- Maturities held near their best levels of the session throughout the afternoon as volume dried up into the close ahead of the Thanksgiving holiday.
- Up front, the 2Y added +0.8bps to 0.524%. Action finished at the midpoint of the 0.500%/0.550% range that has been in place during the month of November.
- In the belly, the 5Y slipped -1.6bps to 1.552%. The yield closed at a one-month low, and slid closer to 1.500% support.
- The 10Y settled -2.6bps @ 2.234%. The benchmark yield is now ~18bps off the November 7 high.
- A modest bid at the long end dropped the 30Y -2.6bps to 2.940%. A move into the 2.900% region would make for a 50% retracement of the move off the October 15 low.
- A flatter curve persisted as the 2-10-yr spread tightened to 171bps.
- Precious metals ended little changed with gold and silver @ $1197 and $16.53, respectively.
- Markets are closed Thursday in observance of Thanksgiving Day. On Friday, the U.S. Treasury market will close at 2pm ET.
Weak Data Weighs on Greenback:
- The Dollar Index drifts on session lows near 87.60.
- The Index was little changed into U.S. trade, but was pushed to these levels as U.S. economic data disappointed across the board.
- EURUSD is +40 pips @ 1.2510 as buyers remain in control for a third session. A quiet day for news and data out of the region has kept participants focused on the weak U.S. data. Traders continue to watch the 1.2400/1.2600 area, which has bookended trade throughout the month of November. Eurozone data scheduled for tomorrow is heavy as M3 money supply, private loans, German preliminary CPI, German unemployment change, GfK German Consumer Climate, and Spanish Flash CPI are due out.
- GBPUSD is +90 pips @ 1.5795 as action presses to its best level in two weeks. Today's bid comes despite just an in-line GDP print (0.7% QoQ) and disappointing business investment and CBI Realized Sales figures.
- USDCHF is -35 pips @ .9605 as selling persists for a third day. Action remains tightly tied to the euro thanks to the Swiss National Bank's EURCHF1.20 floor.
- USDJPY is -20 pips @ 117.75 as trade lingers near seven-year highs. An uneventful session has seen action trapped in a tight 50 pip range.
- AUDUSD is +15 pips @ .8545 as trade rallied off 52-month lows. The hard currency was battered in early trade after construction work done fell short of estimates, but recovered after the weak U.S. data. Australia's private capital expenditures will be released tonight.
- USDCAD is -20 pips @ 1.1235 as action flirts with its lowest close of November. Support in the 1.1200/1.1250 area and the 50 dma (1.1228) remain under close watch. Canadian data scheduled for tomorrow is limited to current account balance.
Afternoon Update: 2Y unch @ 99 31/32...3Y +01/32 @ 99 27/32...5Y +02/32 @ 99 22/32...7Y +05/32 @ 100 09/32...10Y +06/32 @ 100 02/32...30Y +11/32 @ 101 01/32...EURUSD +30 pips @ 1.2505...GBPUSD +80 pips @ 1.5785...USDJPY -30 pips @ 117.65...USDCHF -25 pips @ .9615...AUDUSD +5 pips @ .8535...USDCAD -20 pips @ 1.1235
- Treasuries hold near their best levels of the session following the in-line 7Y note auction.
- The auction drew 1.960% (1.955%) and a 2.63x bid/cover. Indirect bidders (50.0%) provided support as directs (12.8%) were a bit light. Primary dealers were left with 37.2% of the supply.
- Yields across the curve remain lower by -1/-2bps.
- The light bid is having the biggest impact on the 10Y, which is -2bps @ 2.240%.
- A flatter curve persists as the 2-10-yr spread trades 172.5bps.
- Little change in precious metals has gold and silver hovering @ $1197 and $16.57, respectively.
Auction Up: $29B 7Y note auction draws 1.960% (WI 1.955%), 2.63x bid/cover, 50.0% indirect bidders, 12.8% direct bidders
Treasuries are seeing little reaction to the in-line auction.
$29B 7Y Note Auction Preview
- Previous auction drew 2.018%, 2.42x bid/cover, 46.6% indirect bidders, 15.4% direct bidders
- 12-auction averages: 2.173%, 2.54x bid/cover, 44.0% indirect bidders, 19.3% direct bidders
Data Reaction II
- Treasuries are pressing their best levels of the session following another round of disappointing economic data.
- Chicago PMI (60.8 actual v. 63.0 expected), Michigan Sentiment - Final (88.8 actual v. 90.0 expected), new home sales (458K actual v. 470K expected), and pending home sales (-1.1% actual v. 0.5% expected) all fell short of estimates.
- Buying continues to have the biggest impact on the long end as yields there are lower by almost -3bps.
- The 10Y is sitting near 2.230%.
- A flatter curve persists as the 2-10-yr spread trades 171.5bps.
- Precious metals are bid with gold +$1 @ $1198 and silver +$0.07 @ $16.63.
- Attention now turns to this the 11:30am ET 7Y note auction.
Treasuries Rally as Data Disappoints:
- Treasuries are trading at their best levels of the day after the mostly disappointing data.
- Initial claims jumped to 313K (288K expected) and durable orders- ex transportation fell 0.9% (+0.5% expected).
- Personal income was light at +0.2% (+0.3% expected), as was personal spending at +0.2% (+0.4% expected).
- A solid bid has developed across the complex, pushing yields down close to -2.5bps at the long end.
- The 10Y trades -2.4bps @ 2.236%, and is on track for its lowest close in over a month.
- Curve flattening persists as the 2-10-yr spread trades 171.5bps.
- Precious metals remain little changed with gold and silver @ $1197 and $16.58, respectively.
- Yields press to fresh record lows across Europe.
- German Bunds hold slim gains following the uncovered 10Y auction. The auction drew a record low 0.74%, but only managed to raise EUR3.67 bln of the targeted EUR4 bln. Today's -1bp decline has the 10Y at a record low 0.74%.
- UK Gilts sport modest gains after today's mixed data. Second Estimate GDP (0.7% QoQ) was in-line with estimates while preliminary business investment (-0.7% QoQ actual v. 2.3% QoQ expected) and CBI Realized Sales (27 actual v. 28 expected) missed. A -2bp drop has the 10Y @ 1.99% and contending with its lowest close since May 2013.
- French OATs hold small gains amid a lackluster trade. The 10Y is off -1bp @ 1.06%, and looking at a record low close.
- Peripheral debt hovers little changed. Both the Italian and Spanish 10Y are flat at their respective 2.120% and 1.920%.
Aussie Dollar Remains Weak:
- The Dollar Index holds slim gains as trade flirts with the 88.00 level.
- The early bid has the greenback looking to reverse two days of losses.
- EURUSD is -25 pips @ 1.2445 as action presses session lows. Another quiet day for news and data from the region has kept trade in a 50 pip range. The 1.2400 support level remains key.
- GBPUSD is +30 pips @ 1.5735 as trade ticks to a two-week high. Sterling pressed to session lows near 1.5680 in response to the in-line Second Estimate GDP (0.7% QoQ) and preliminary business investment (-0.7% QoQ actual v. 2.3% QoQ expected) miss, but has seen an aggressive bid off the lows. Support in the 1.5600 area has withstood several tests over the past two weeks.
- USDCHF is +20 pips @ .9660 as trade parallels moves in the euro. Traders continue to keep an eye on EURCHF, which has managed to tick back up to 1.2030 in recent days.
- USDJPY is -20 pips @ 117.75 as sellers look to remain in control for a second session. Traders have had to grapple with comments from BOJ member Shirai suggesting even more must be done to reach the central bank's 2% inflation target and from Fin Min Sakakibara, aka Mr. Yen, stating the depreciation of the currency is near its end.
- AUDUSD is -30 pips @ .8500 as sellers remain in control for a third session following the disappointing overnight reading on construction work done (-2.2% QoQ actual v. -1.7% QoQ expected). Support in the .8400 area dates back to the middle of 2009 and is in play. USDCNY slipped to 6.1345.
- USDCAD is +15 pips @ 1.1270 amid a quiet trade. The 50 dma helps support in the 1.1200/1.1250 area.
Treasuries Trade Flat:
- Treasuries drift little changed ahead of the cash open.
- A quiet overnight session has kept yields in a tight 2bp range.
- Treasury bears will look to run yields back above their key support levels that were broken yesterday.
- Up front, the 2Y holds unchanged @ 0.516%. Action remains trapped in the 0.500%/0.550% range that has been in place since the start of November.
- In the belly, the 5Y is flat @ 1.568%. Yesterday's bid dropped the yield below key support at 1.600%.
- The 10Y trades -0.4bps @ 2.256%. The benchmark yield sits at a one-month low after 2.300% support gave way.
- At the long end, the 30Y is -0.5bps @ 2.961%. The 2.954% level represents a 38.2% retracement of the move off the October 15 low.
- A slightly flatter curve persists as the 2-10-yr spread trades 174bps.
- Precious metals are little changed with gold and silver @ $1196 and $16.57, respectively.
- Data: MBA Mortgage Index (7), initial and continuing claims, durable orders, personal income and spending, PCE Prices - Core (8:30), Chicago PMI (9:45), Michigan Sentiment - Final (9:55), new home sales, and pending home sales (10).
- Auction: $29 bln 7Y notes.
Yields Break Support
- Treasuries ended on session highs, propelled by the superb 5Y note auction.
- The complex held small gains into the cash open following more warnings of downside risks to the global economy.
- Maturities slid back to their respective breakeven lines after Q3 GDP - Second Estimate (3.9% actual v. 3.2% expected, 3.5% previous) surprised to the upside.
- However, buyers emerged in defense of the flat line as housing prices saw mixed results.
- Trade chopped around with slight gains into the $35 bln 5Y note auction. The auction drew 1.595% (WI 1.612%) and a superb 2.91x bid/cover. Indirect (65.0%) bids posted their best showing in 10 years while directs (9.9%) were a bit light. Primary dealers ended up with just 25.1% of the supply.
- Aggressive buying developed in response to the strong auction, pushing yields below key support that had been in place over the past month.
- Up front, the 2Y ended @ 0.516% after seeing an adjustment following yesterday's auction.
- In the belly, the 5Y slid -3.5bps to 1.568%. The yield broke below support in the 1.600% area and closed at its lowest level since October 28.
- The 10Y shed -5bps to 2.260%. The benchmark yield ended at its own one-month low as action dipped below 2.300% support.
- Outperformance at the long end dropped the 30Y -5.3bps to 2.966%. The yield on the long bond posted its lowest close since October 20.
- Aggressive flattening along the yield curve dropped the 2-10-yr spread below 175bps for the first time since May 2013.
- Also notable was the 5-30-yr spread narrowing to 140 bps for the first time since January 2009 and the 10-30-yr spread tightening to 70bps for the first time since March 2009.
- Precious metals gained as gold added +$2 to $1198 and silver climbed +$0.21 to $16.59.
- Data: MBA Mortgage Index (7), initial and continuing claims, durable orders, personal income and spending, PCE Prices - Core (8:30), Chicago PMI (9:45), Michigan Sentiment -Final (9:55), new home sales, and pending home sales (10).
- Auction: $29 bln 7Y notes (11:30).
Dollar Dips Below 88.00:
- The Dollar Index holds on session lows near 87.85 as sellers remain in control for a second session.
- The recent weakness has many participants turning their attention towards 87.50 support.
- EURUSD is +35 pips @ 1.2475 as action continues its climb off 1.2400 support. The single currency pressed to its worst levels of the session following the strong U.S. GDP number, but has seen steady buying over the remainder of the session as home prices and consumer confidence were light. A run through 1.2600 and the 50 dma (1.2630) helps the bull case.
- GBPUSD is +10 pips @ 1.5715 as trade contends with a two-week high. Sterling was punished in early trade after the latest Bank of England Inflation Report showed a split Monetary Policy Committee, but has attracted bids amid the broad based dollar weakness. British data scheduled for tomorrow includes Second Estimate GDP, preliminary business investment, and CBI Realized Sales.
- USDCHF is -25 pips @ .9640 as trade continues to slide off 16-month highs. An absence of news and data out of Switzerland has kept the pair tightly correlated to the euro.
- USDJPY is -50 pips @ 117.75 as trade tests the lower end of the 117.50/118.50 range that has been in place for much of the past week. The pair failed to rally following further promises of more easing by Bank of Japan Governor Haruhiko Kuroda.
- AUDUSD is -80 pips @ .8530 as action looks likely to close at its lowest level in 52 months. The hard currency has seen selling after comments from Reserve Bank of Australia Deputy Governor Lowe suggested the exchange rate remains too high. Australia's construction work done will cross the wires tonight.
- USDCAD is -40 pips @ 1.1235 as action flirts with the 50 dma. Today's selling comes following the mixed core retail sales (0.0% MoM actual v. 0.4% MoM expected) and retail sales (0.8% MoM actual v. 0.6% MoM expected) data.