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Update: 2014-04-23 15:55:14 ET

Moving the Market

MBA Mortgage Index: Actual -3.3%, prior 4.3%

New Home Sales: Actual 384K, consensus 455K, prior 440K (revised 449K)

Treasury auctions $35B 5y notes, draws 1.732%

3:26:05 ET
10-Year:+06/32 2.685    GNMAs:     EUR/USD:1.3815    USD/JPY:102.43   
Treasuries Book Solid Gains:
  • Treasuries booked solid gains as buyers managed to regain control. 
  • The complex held small overnight gains into cash open, and climbed to its best levels of the day after new home sales (384K actual v. 455K expected) missed estimates by a large margin
  • Trade drifted near the highs into the solid $35 bln 5y note auction, and held at those levels for the remainder of the session. 
  • The 5y auction drew 1.732% and a 2.79x bid/cover. An in-line indirect takedown (44.9%) was supported by a strong direct bid (18.0%). Primary dealers were left with 37.1% of the supply. 
  • The 5y sank -3.5bps to 1.711%. Action probed 1.700% support in late-morning trade, but was unable to break below the level. 
  • The 10y shed -4bps to 2.686%. Traders will continue to monitor the 2.680% pivot in the days ahead.
  • At the long end, the 30y fell -3.4bps to 3.469%. The yield narrowly avoided its lowest close in 10 months, which would have occurred on a close below 3.450%. 
  • Little change along the yield curve saw the 5-30-yr spread hold near 175.5bps
  • Precious metals ended firm with gold +$4 @ $1285 and silver +$0.08 @ $19.44. 
  • Data: Initial and continuing claims and durable orders (8:30). 
  • Auction: $29 bln 7y notes.

2:19:49 ET
10-Year:+04/32 2.690    GNMAs:     EUR/USD:1.3813    USD/JPY:102.31   
Dollar Holds Little Changed:
  • The Dollar Index holds little changed as action nears the 79.90 flat line. 
  • Overnight selling dropped action onto the 79.70 level, but steady buying over the course of the session has erased the overnight losses. 
  • EURUSD is +10 pips @ 1.3815 after giving up the majority of its early gains. The single currency probed the 1.3850 level as buyers emerged following the mostly better than expected PMI figures, but action struggled at the level as has steadily slipped back towards the flat line. Support in the 1.3800 area remains under close watch. Eurozone data out tomorrow is limited to German Ifo Business Climate. ECB head Mario Draghi will speak in Amsterdam
  • GBPUSD is -60 pips @ 1.6765 as trade slides off its best levels since November 2009 and presses to a one-week low. Sterling has been offered for most of the session as some conflicting BOE member opinions over slack in the UK economy and the inflation outlook weigh. The 1.6700/1.6750 area provides the first level of support. Britain's CBI Realized Sales will be released tomorrow.
  • USDCHF is -20 pips @ .8830 as trade attempts to recover its early losses. The pair pressed to nearly .8800 amid the early weakness, but is now attempting to retake the 50 dma (.8834). Action remains closely tied to the euro due to the Swiss National Bank's EURCHF1.20 floor. 
  • USDJPY is -30 pips @ 102.30 as trade dips back below the 50 dma. Traders continue to watch the 102.50 pivot area, which has been of interest since the beginning of February.
  • AUDUSD is -85 pips @ .9280 as trade pulls back to its lowest level in two weeks. The hard currency has been under pressure in today's session after Australian CPI posted a cooler than anticipated reading. Trendline support off the January lows lurks in the .9250 region and will be of interest in the days ahead. Traders should take note of the early evening Reserve Bank of New Zealand rate decision as it has the potential to provide some volatility. 
  • USDCAD is flat @ 1.1030 amid a mostly uneventful session. Today's choppy trade follows the in-line Canadian core retail sales (0.6% MoM) data.

1:10:17 ET
10-Year:+06/32 2.687    GNMAs:     EUR/USD:1.3815    USD/JPY:102.28   
Auction Reaction:
  • Treasuries are seeing some light buying following some initial selling as traders digest the solid $35 bln 5y note auction
  • The auction drew 1.732% and a 2.79x bid/cover. An in-line indirect takedown (44.9%) was supported by the strong direct bid (18.0%). Primary dealers were left with 37.1% of the supply. 
  • A -4.5bp drop has the 5y testing support in the 1.700% area. 
  • The 10y is off -3.8bps @ 2.688% as action continues to test the 2.680% pivot. 
  • At the long end, the 30y holds -3bps @ 3.473% and is threatening its lowest close in 10 months. 
  • A steeper curve persists as the 5-30-yr spread trades 177bps.

1:05:02 ET
10-Year:+05/32 2.689    GNMAs:     EUR/USD:1.3817    USD/JPY:102.29   
Auction Up:
  • $35B 5y note auction draws 1.732%, 2.79x bid/cover, 44.9% indirect bidders, 18.0% direct bidders
  • Treasuries are seeing some slippage following the solid auction

11:48:55 ET
10-Year:+07/32 2.683    GNMAs:     EUR/USD:1.3813    USD/JPY:102.25   
$35B 5y Note Auction Preview:
  • Previous auction drew 1.715%, 2.99x bid/cover, 50.9% indirect bidders, 23.1% direct bidders
  • 12-auction averages: 1.397%, 2.65x bid/cover, 45.6% indirect bidders, 12.6% direct bidders

11:15:07 ET
10-Year:+07/32 2.680%    GNMAs:     EUR/USD:1.3821    USD/JPY:102.32   
Euro Moves Above 1.3800 Following PMI Release: The Dollar Index continues to trade in a tight range below the 80.00 level. Economic news was poor this morning as markets witnessed a big miss on new home sales, a drop in mortgage applications, and a miss in a preliminary April manufacturing survey. This has led to some selling in the greenback, but it did not break it out of its recent range. 
  • The euro rallied back over 1.3800 following the preliminary looks at PMI. The Eurozone PMI came in at a 35-month high as it outpaced expectations. Germany was a key driver while France underperformed. The news points to continued improvement in the Eurozone economy, but market participants are still looking at April 30 and the next release of inflation data as the key driver for the ECB. 
  • The pound has pulled back from its recent highs following the release of the Bank of England minutes. BoE members were on the same page in that they viewed the economic recovery to be on target. But there was a difference of opinion on the amount of slack in the economy and the outlook for inflation. This difference of opinion was viewed as being slightly more dovish by markets and the pound pulled back from its recent run. Sterling has been able to firmly hold the 1.6770 area on this pullback. 
  • The yen has been able to climb back into the high end of the 102 level but overall the moves remain uneventful. Some of the push higher was aided by a weaker than expected China PMI figure released overnight. Tonight the country will release its latest inflation data.

10:06:35 ET
10-Year:+04/32 2.703    GNMAs:     EUR/USD:1.3837    USD/JPY:102.26   
Data Reaction:
  • Treasuries are back near session highs following the big new home sales (384K actual v. 455K expected) miss
  • Aggressive buying has yields in in the belly leading the way lower with the 5y -4bps @ 1.701%. Support in the area will be watched closely in the days ahead. 
  • The 10y trades -3.6bps @ 2.690%. Traders remain mindful of the 2.680% pivot as a breakdown puts 2.600% back in play. 
  • At the long end, the 30y lags with action holding -2.2bps @ 3.481%. A close below the 3.450% level would be the lowest in more than 10 months. 
  • A steeper curve persists as the 5-30-yr spread trades wider @ 178bps
  • Precious metals remain firm with gold +$5 @ $$1286 and silver +$0.09 @ $19.45. 
  • Attention now turns to this afternoon's $35 bln 5y note auction.

7:26:20 ET
10-Year:+02/32 2.704    GNMAs:     EUR/USD:1.3838    USD/JPY:102.21   
Aussie Slides on Cool CPI:
  • The Dollar Index presses session lows near 79.70.
  • The Index continues to struggle near the key 80.00 level, and has spent the entire session in negative territory. 
  • EURUSD is +35 pips @ 1.3840 following the region's mostly better than expected Flash Manufacturing and Services PMI data. Eurozone and German readings both outpaced estimates while French numbers fell short of estimates but remained in expansion. The disappointing French data sparked calls for a weaker single currency by Fin Min Michel Sapin. Action has lifted off 1.3800 support, and is now trading near two-week highs. Also notable was Portugal's return to the debt markets for the first time since 2011. 
  • GBPUSD is -25 pips @ 1.6800 as trade slips off its best levels since November 2009. The latest Bank of England MPC votes were unanimous, in favor of keeping both the key rate (0.50%) and asset purchase program (GBP375 bln) unchanged. Likely having a bigger impact on today's action were the mixed public sector net borrowing (GBP4.9 bln actual v. GBP8.9 bln expected) and CBI Industrial Order Expectations (-1 actual v. 7 expected, 6 previous). The 1.6700/1.6750 area provides the first level of support. 
  • USDCHF is -40 pips @ .8810 as trade slides to a one-week low. Today's weakness has dropped action back below the 50 dma, and comes on the back of euro strength. 
  • USDJPY is -35 pips @ 102.25 as sellers take control for a second session following seven days of gains. Traders will continue to watch the 102.50 pivot, which is guarded by the 50 dma. 
  • AUDUSD is -80 pips @ .9285 as trade slides to a two-week low. The overnight weakness comes after Australia's CPI (0.6% QoQ actual v. 0.8% QoQ expected) and Trimmed Mean CPI (0.5% QoQ actual v. 0.7% QoQ expected) both saw cooler than expected readings. The .9250 area provides the first level of support. USDCNY ticked up to 6.2377, a 14-month high, after China's HSBC Flash Manufacturing posted a disappointing 48.3 (48.4 expected, 48.0 previous)
  • USDCAD is +5 pips @ 1.1030 amid a rather uneventful trade. An early bid tested the 50 dma (1.1053), but trade remains unable to take out resistance in the area. Canada's retail sales will be released later this morning.

6:57:14 ET
10-Year:+01/32 2.705    GNMAs:     EUR/USD:1.3841    USD/JPY:102.25   
Treasuries Tick Higher in Early Trade:
  • Treasuries hold small gains as trade readies for the cash open. 
  • Overnight ranges remained tight, limited to at most 3bps. 
  • The early bid is having the biggest impact on the belly as the 5y trades -3ps @ 1.716%. Traders continue to monitor support in the 1.700% area while a move up to 1.800% would provoke a test of the September/March highs. 
  • The 10y holds -2.3bps @ 2.703% as action slips back below the 50 dma. The 2.680% pivot will be watched closely as a breakdown sets up a test of 2.600%. 
  • The 30y is -1.3bps @ 3.490% as the long end slightly underperforms. A close below 3.450% would be the lowest in more than 10 months. 
  • A steeper curve has developed as the 5-30-yr spread trades wider @ 177.5bps. 
  • Precious metals are on their highs with gold +$7 @ $1288 and silver +$0.12 @ $19.48. 
  • Data: MBA Mortgage Index (7) and new home sales (10). 
  • Auction: $35 bln 5y notes.

3:33:16 ET
10-Year:unch 2.716    GNMAs:     EUR/USD:1.3802    USD/JPY:102.58   
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.

2:23:42 ET
10-Year:-03/32 2.729    GNMAs:     EUR/USD:1.3801    USD/JPY:102.61   
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.