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Update: 2014-10-31 08:56:35 ET

Moving the Market

Personal Income: Actual 0.2%, consensus 0.3%, prior 0.3%

Personal Spending: Actual -0.2%, consensus 0.1%, prior 0.5%

PCE Prices - Core: Actual 0.1%, consensus 0.1%, prior 0.1%

Employment Cost Index: Actual 0.7%, consensus 0.5%, prior 0.7%

Chicago PMI (9:45): Briefing 58.0, consensus 60.0, prior 60.5

Michigan Sentiment - Final (9:55): Briefing 85.5, consensus 86.4, prior 86.4

8:36:56 ET
10-Year:-09/32 2.337    GNMAs:     EUR/USD:1.2561    USD/JPY:111.72   
Data Reaction:
  • Treasuries are seeing little response to this morning's data batch. 
  • Personal income edged up 0.2% (0.3% expected) while spending dipped -0.2% (0.1%) expected. 
  • The Employment Cost Index climbed 0.7% (0.5% expected) and PCE Price - Core was in-line at 0.1%. 
  • Early selling has yields across the curve firmer by a couple of bps.
  • A +3bp advance has the 10Y @ 2.335%. 
  • A steeper curve persists as the 2-10-yr spread trades 184bps. 
  • Precious metals are off their lows with gold -$30 @ $1168 and silver -$0.47 @ $15.95. 
  • Chicago PMI will cross the wires at 9:45am ET and Michigan Sentiment - Final is due out at 9:55am ET.

8:05:33 ET
10-Year:-07/32 2.329    GNMAs:     EUR/USD:1.2476    USD/JPY:111.63   
European Yields:
  • Yields are flat to lower across Europe
  • Eurozone CPI Flash Estimate (0.4% YoY) and the unemployment rate (11.5%) both matched expectations
  • German Bunds drift little changed despite the big retail sales (-3.2% MoM actual v. -0.8% MoM expected) miss. A flat session has the 10Y holding @ 0.850%.
  • UK Gilts are slipping amid an uneventful session. The 10Y is +1bp @ 2.240%
  • French OATs are bid in response to the weak consumer spending (-0.8% MoM actual v. -0.3% MoM expected) figure. Modest buying has the 10Y lower by -3bps @ 1.200%. 
  • Italian BTPs are aggressively bid after the unemployment rate ticked to a record high 12.6%. Today's buying spree has the 10Y down -10bps @ 2.385%. 
  • Spanish Bonos hold moderate gains. A -7bp drop has the 10Y @ 2.085%, hovering just above all-time lows.

7:13:25 ET
10-Year:-08/32 2.329    GNMAs:     EUR/USD:1.2587    USD/JPY:111.70   
Surprise BOJ Action Drops Yen to Lowest Levels Since January 2008:
  • The Dollar Index presses session highs near 88.70 as trade flirts with its best monthly close since February 2009
  • EURUSD is -35 pips @ 1.2575 as trade presses lower for a third day. The weakness in the single currency comes amid a slew of disappointing data as French consumer spending (-0.8% MoM actual v. -0.3% MoM expected) and German retail sales (-3.2% MoM actual v. -0.8% MoM expected) saw sharper than expected declines while eurozone CPI Flash Estimate (0.4% YoY) and the unemployment rate (11.5%) matched expectations. The recent lows near 1.2500 are in focus. 
  • GBPUSD is flat @ 1.6000 as trade tests support in the area. A lack of news and data has made for an uneventful session with early action holding yesterday's lows. A break below 1.5900 will push sterling to its lowest level since September 2013. 
  • USDCHF is +35 pips @ .9595 as trade nears a test of the October highs in the .9685 area. Early action has been tightly tied to the euro as news and data out of Switzerland were absent from the calender. 
  • USDJPY is +245 pips @ 111.70 after the Bank of Japan unexpectedly increase its bond buying program to an annual pace of JPY80 trln (JPY50 trln previous) in a 5-4 vote. The surprise announcement launched the pair to its best levels since January 2008, blowing out stops at the September/October highs near 110.00. Overlooked amid today's madness was an extremely weak household spending (-5.6% YoY actual v. -4.0% YoY expected) print and an in-line Tokyo core CPI (2.5% YoY) reading. 
  • AUDUSD is -15 pips @ .8825 after paring its early losses. Overnight selling had the hard currency probing the .8800 level, but trade has managed to recoup its losses as risk assets rally. The upper end of the .8650/.8850 range that has been in place for the past month remains in focus. USDCNY was little changed @ 6.1138. 
  • USDCAD is +10 @ 1.1195 as trade remains on hold into this morning's Canadian GDP figure. The 1.1150 area provides minor support while 1.1100 is home to more meaningful support and the 50 dma.

6:45:48 ET
10-Year:-05/32 2.325    GNMAs:     EUR/USD:1.2560    USD/JPY:111.85   
Treasuries Slip as BOJ Ups Bond Purchases:
  • Long dated Treasuries are slipping in early trade after the Bank of Japan unexpectedly increased its bond buying program to an annual pace of JPY80 trln (JPY50 trln previous).
  • Overnight ranges were wider than usual, expanding to 7bps in the belly. 
  • Selling at the long end has the 30Y +2.5bps @ 3.061%. Action tested the 3.100% level before running into resistance.
  • The 10Y is +1.5bps @ 2.320%. The overnight weakness has the benchmark yield testing 2.300% resistance. 
  • In the belly, the 5Y is +0.2bps @ 1.582%. The 1.650% region remains problematic as the 50, 100, and 200 dma lurk in the vicinity. 
  • Up front, the 2Y holds -1.5bps @ 0.470% after failing at the 0.500% level. 
  • A steeper curve has taken hold with the 2-10-yr spread widening to 185bps
  • Precious metals remain under pressure with gold -$26 @ $1172 and silver -$0.40 @ $16.02.
  • Data: Personal income and spending, PCE Prices - Core, Employment Cost Index (8:30), Chicago PMI (9:45), and Michigan Sentiment - Final (9:55).

3:27:28 ET
10-Year:+01/32 2.307    GNMAs:     EUR/USD:1.2611    USD/JPY:109.22   
Treasuries Eke Out Gains:
  • Treasuries booked small gains as steady selling persisted throughout U.S. trade. 
  • The complex was bid into the cash open amid weakness in Europe and climbed to its best levels of the day in response to the strong Q3 GDP-Adv. (3.5% actual v. 3.0% expected) report
  • Trade chopped around near the highs until U.S. equities began to gain momentum. 
  • From there, sellers were in charge into early afternoon trade. Maturities tested their breakeven lines shortly after the weak $29 bln 7Y note auction, but were unable to push into negative territory. 
  • The auction drew 2.018% (WI 2.008%) and a light 2.42x bid/cover. Indirect (46.6%) bids provided support as direct bids (15.4%) fell short of their 12-auction averages. Primary dealers were left with just 38% of the supply.
  • A choppy trade developed throughout the afternoon, keeping yields in a tight range. 
  • Up front, the the 2Y slipped -0.4bps to 0.485%. Most of U.S. action was confined to a tight 2bp range. 
  • In the belly, the 5Y eased -1.7bps to 1.580%. Early selling ran the yield to a three-week high near 1.620%, but action was unable to pierce resistance in the area guarded by the 50, 100, and 200 dma. 
  • The 10Y fell -1.8bps to 2.305%. Trade managed to hold the closely watched 2.300% level
  • At the long end, the 30Y shed -1.2bps to 3.036%. The yield threatened to break below 3.000%, but sellers stepped in to defend the level
  • A slightly steeper curve took hold as the 2-10-yr spread narrowed to 182bps. 
  • Precious metals were hit hard as gold fell -$26 to $1199 and silver slumped -$0.85 to $16.41. 
  • Data: Personal income and spending, PCE Prices - Core, Employment Cost Index (8:30), Chicago PMI (9:45), and Michigan Sentiment - Final (9:55).

2:15:06 ET
10-Year:unch 2.310    GNMAs:     EUR/USD:1.2613    USD/JPY:109.37   
Dollar Holds 86.00:
  • The Dollar Index held 86.00 and has seen a bounce back into the 86.15 area.
  • EURUSD is -25 pips @ 1.2610 after recouping most of its early losses. The single currency was pressured to below 1.2550 immediately after the strong U.S. GDP print, but quickly recovered. Trade has been under pressure throughout the session after CPI in both Germany and Spain came in light. Eurozone data scheduled for tomorrow includes core CPI Flash Estimate, the unemployment rate, French consumer spending, and German retail sales. 
  • GBPUSD is -10 pips @ 1.6000 as trade flirts with support in the area. Traders continue to watch this level closely as a breakdown puts the October lows near 1.5900 in jeopardy.
  • USDCHF is +15 pips @ .9560 as action fights to hold the flat line. The pair spiked above .9600 in response to the early weakness in the euro, but has surrendered most of the gains.
  • USDJPY is +60 pips @ 109.45 as trade contends with its best levels in more than six years. The pair saw a boost in afternoon trade amid reports Japanese pension GPIF was increasing its equity allocation to 25% while lowering its Japan debt allocation to 35%. Traders should be mindful of stops in the 110.00 area as the Bank of Japan opines tonight. Japan's household spending and Tokyo core CPI are due out tonight.
  • AUDUSD is +40 pips @ .8835 as trade nears its best levels of the day. Trade pressed to almost .8750 early in the session following the bog let up in import prices, but has moved back towards the upper end of the .8650/.8850 range as risk assets catch a bid. Tonight's Australian data is limited to PPI.
  • USDCAD is flat @ 1.1185 as traders await tomorrow's Canadian GDP report.