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Update: 2017-07-25 15:55:10 ET

Moving the Market
  • May FHFA Housing Price Index: Actual 0.4%, Briefing.com consensus 0.7%, Prior 0.6% (revised from 0.7%)
  • May S&P Case-Shiller Home Price Index: Actual 5.7%, Briefing.com consensus 5.7%, Prior 5.7%
  • EUR/USD pushes through $1.17 for first time since 2015
  • Greece's 5-year note sale prices at 4.625%
  • July Consumer Confidence Index: Actual 121.1, Briefing.com com 116.8, Prior 118.9
  • $26 bln 2-year Treasury auction: High yield 1.395% (When-Issued 1.401%), Bid-to-cover 3.06, Indirect bid 58.5%, Direct bid 16.9%

7/25/2017
3:31:26 ET
10-Year:-20/32 2.33    GNMAs:     EUR/USD:1.1650    USD/JPY:111.90   

Treasuries Suffer Sharp Losses

  • The U.S. Treasury market took severe losses today as higher oil prices and record highs for U.S. equity indices prompted investors to dump safe-haven assets. The yield curve steepened as expectations for Fed policy remained mostly unchanged and  3-month Treasury bills rallied on debt ceiling worries. The U.S. economic data was mostly in line with estimates although consumer confidence unexpectedly jumped for July. The $26 bln 2-year Treasury auction was met with strong demand. The S&P 500 now trades up 0.30% to 2,477.2 and the U.S. Dollar Index is higher by 0.07% at 94.04
  • Yield Check:
    • 2-yr: +3 bps to 1.39%
    • 5-yr: +7 bps to 1.89% 
    • 10-yr: +8 bps to 2.33%
    • 30-yr: +7 bps to 2.91%
  • News:
    • The Conference Board's Consumer Confidence Index jumped to 121.1 in July from 118.9 in June. The Briefing.com consensus was 116.8
      • Expectations rose to 103.3 from 99.6
      • The Present Situation Index rose to 147.8 from 143.9
    • The S&P/Case-Shiller 20-city Home Price Index rose by 5.7% y/y in May, in line with the Briefing.com consensus. April's growth was 5.7% too
    • The FHFA Housing Price Index was up 0.4% m/m in May, missing the Briefing.com consensus of 0.7%. April saw growth of 0.6%
    • Home-buying plans jumped in July as 1.8% of respondents expected to buy a new home in the next six months. That was the highest level in 39 years
    • The Richmond Fed's Manufacturing Index jumped to 14 in July (prior 7)
    • $26 bln 2-year Treasury auction
      • High yield: 1.395% (When-Issued 1.401%)
      • Bid-to-cover: 3.06
      • Indirect bid: 58.5%
      • Direct bid: 16.9%
  • Commodities:
    • WTI crude: +3.34% to $47.89/bbl.
    • Gold: -0.37% to $1,249.6/troy oz.
    • Copper: +3.8% to $2.8405/lb.
  • Currencies:
    • EUR/USD: +0.06% to 1.1650
    • USD/JPY: +0.72% to 111.90
  • Data out Tomorrow:
    • MBA Mortgage Index for the week ending 7/22 (07:00 ET)
    • June New Home Sales (10:00 ET)
    • Crude Inventories for the week ending 7/22 (10:30 ET)
    • FOMC Rate Decision (14:00 ET)
  • Treasury Auction:
    • $34 bln 5-year Treasury auction (results at 13:00 ET)

 
7/25/2017
2:26:25 ET
10-Year:-18/32 2.32    GNMAs:     EUR/USD:1.1647    USD/JPY:111.82   

Dollar Rebounds

  • The U.S. Dollar Index is up 0.02% to 94.00 today as the dollar advanced against the Japanese yen amidst a global stock market rally. The Swiss franc also declined. Both the yen and the Swissy are low-yielding currencies that are frequently used for funding carry trade. As such, they tend to trade inversely with risky assets. There was a sharp sell-off in the USD this morning when President Trump said that the U.S. would see a free-trade agreement with the U.K., but that decline was later entirely reversed. The Canadian dollar made little progress today although oil prices rallied sharply. Canadian sovereign 10-year notes yielded 2.00% for the first time since 2014. The euro currency traded to its highest level since 2015 as German business confidence improved. The U.K.'s manufacturing sector is seeing its fastest growth in 22 years, according to the CBI
  • EUR/USD: +0.02% to 1.1646
    • Germany's Ifo Business Climate Index unexpectedly rose to 116.0 in July (prior 115.2)
      • The Current Assessment gauge rose to 125.4 (prior 124.2)
      • The Business Expectations measure climbed to 107.3 (prior 106.8)
    • The French Business Survey unexpectedly remained at 109 in July (prior 108)
  • GBP/USD: +0.10% to 1.3042
    • In the U.K., the CBI Industrial Trends Orders fell more than expected to 10 for July (prior 16)
  • USD/CHF: +0.46% to 0.9508
  • USD/JPY: +0.65% to 111.82
    • The two new members of the Bank of Japan's nine-member board said that debating an exit from monetary stimulus now would be dangerous and that the 2% inflation goal should be achieved quickly
  • USD/CNY: +0.01% to 6.751
  • USD/INR: +0.12% to 64.45
  • USD/RUB: -0.15% to 59.92
  • USD/TRY: +0.24% to 3.564
  • USD/BRL: +0.45% to 3.161
    • Brazil's GV Consumer Confidence Index fell to 82.0 for July (prior 82.3)
  • USD/MXN: +0.16% to 17.757
  • USD/CAD: +0.02% to 1.2516
  • AUD/USD: +0.15% to 0.7937
  • NZD/USD: -0.26% to 0.7417

 
7/25/2017
1:23:37 ET
10-Year:-16/32 2.31    GNMAs:     EUR/USD:1.1655    USD/JPY:111.59   

Stocks and Oil Hold near Highs, Treasuries Stabilize

  • The U.S. Treasury market has rallied from the worst levels of the session following a well-received $26 bln 2-year Treasury auction. The auction stopped through by 0.6 basis points and drew a bid-to-cover ratio of 3.06 versus the 12-auction average of 2.73. The indirect bid was higher than usual at 58.5% versus the 12-auction average of 45.0%. The S&P 500 now trades higher by 0.41% at 2,480.1 and the U.S. Dollar Index is up 0.02% to 93.99. WTI crude is adding 3.22% to $47.83/bbl. and gold is down 0.23% at $1,251.4/troy oz.
  • Yield Check:
    • 2-yr: +2 bps to 1.38%
    • 5-yr: +5 bps to 1.87%
    • 10-yr: +6 bps to 2.31%
    • 30-yr: +6 bps to 2.90%

 
7/25/2017
1:05:16 ET
10-Year:-17/32 2.32    GNMAs:     EUR/USD:1.1656    USD/JPY:111.63   

Treasury Auction Results

  • $26 bln 2-year Treasury auction
    • Auction results:
      • High yield: 1.395% (When-Issued 1.401%)
      • Bid-to-cover: 3.06
      • Indirect bid: 58.5%
      • Direct bid: 16.9%
    • Average results of prior 12 auctions:
      • High yield: 1.095%
      • Bid-to-cover: 2.73
      • Indirect bid: 45.0%
      • Direct bid: 14.1%

 
7/25/2017
11:55:54 ET
10-Year:-16/32 2.31    GNMAs:     EUR/USD:1.1654    USD/JPY:111.57   

Oil and Stocks Push Higher

  • Treasuries continue to nurse deep losses late this morning as traders brace themselves for $26 bln of 2-year notes, set to be auctioned at 13:00 ET. The S&P 500 is adding 0.43% at 2,480.5 and WTI crude is up 2.85% to $47.66/bbl. The U.S. Dollar Index is adding 0.03% to 94.00 and gold is down 0.26% to $1,251/troy oz.
  • The looming U.S. government debt ceiling has caused the yield on the 3-month Treasury bill to move substantially higher than the yield of the 6-month bill. More from Bond Vigilantes
  • Fitch Ratings writes today that there is a structural gap between European and U.S. high-yield credit quality
  • Yield Check:
    • 2-yr: +2 bps to 1.38%
    • 5-yr: +5 bps to 1.87%
    • 10-yr: +5 bps to 2.31%
    • 30-yr: +6 bps to 2.90%

 
7/25/2017
11:44:51 ET
10-Year:-15/32 2.314%    GNMAs:     EUR/USD:1.1654    USD/JPY:111.55   

Greece Returns to Debt Markets: The Dollar Index slumped to 93.63 before seeing a bid rally it back to the 94 level. The early morning low marked a 13-month low for the greenback against a basket of currencies. The 93 area has been a key area of support since early 2015. This will mark a significant test of support in the coming periods. The move comes ahead of tomorrow's Fed meeting. At the moment there is little expected but there have been some whispers that the Fed may want to target a September start date for its balance sheet unwind. This should help provide some support for the dollar in today's session.

  • The euro hit 1.1712 today, its best level since August 28, 2015 when it hit 1.1714. The euro was bolstered by Germany's Ifo Business survey which beat expectations, highlighting the upbeat optimism in European markets. In addition, Greece returned to the debt markets for the first time since 2014 with a well received auction. This bond sale was a major endorsement from the markets in terms of the improving health of the Euro zone region. The euro has pulled back approx 60 pips from its highs ahead of tomorrow's Fed announcement.
  • The pound has been whipping around in the 1.30-1.31 area. Sterling ran to 1.3084 in early trade but has given up approx half of its gains. The U.K. held a successful 30-year bond auction today with Yield hitting 1.83% and Bid/Cover coming in at 2.2x which compared to 1.67% and 2.1x in prior auction.
  • The yen has pulled back into the 111 level and is testing its 100-sma (111.69). One of the more interesting aspects of today's Bank of Japan Minutes release was the debate over how much the central bank should disclose when it intends to exit its purchase program. Members were quick to note that the bank still was far away from inflation objectives but the fact that the discussions are underway could be taken as a hawkish step for the BoJ.

 
7/25/2017
11:21:43 ET
10-Year:-18/32 2.32    GNMAs:     EUR/USD:1.1656    USD/JPY:111.67   

Treasury Auction Preview

  • $26 bln 2-year Treasury auction (results at 13:00 ET)
    • Prior auction results:
      • High yield: 1.348%
      • Bid-to-cover: 3.03
      • Indirect bid: 56.6%
      • Direct bid: 18.3%
    • Average results of prior 12 auctions:
      • High yield: 1.095%
      • Bid-to-cover: 2.73
      • Indirect bid: 45.0%
      • Direct bid: 14.1%

 
7/25/2017
10:55:14 ET
10-Year:-15/32 2.31    GNMAs:     EUR/USD:1.1663    USD/JPY:111.60   

2-Year Treasury Auction Ahead

  • The Treasury complex remains sharply lower today although the 2-year note has held up well relative to the longer maturities. Yields in Europe are also higher as WTI crude gains 2.22% at $47.38/bbl. and the S&P 500 adds 0.35% to 2,478.3. Gold is down 0.22% to $1,251.6/troy oz. and the U.S. Dollar Index has recovered to lose just 0.04% at 93.94
  • Greece's 5-year sovereign debt sale will raise EUR3.5 bln at a yield of 4.625%
  • The 3-month Treasury bill that was auctioned on Monday at 1.18% now yields just 1.155%. The auction had tailed by two basis points. Treasury bills are now being exposed to concerns about the looming U.S. government debt ceiling
  • Home-buying plans jumped in July as 1.8% of respondents expected to buy a new home in the next six months. That was the highest level in 39 years
  • Former Minneapolis Fed President Kocherlakota writes today that the weak dollar should not induce the Fed to hike too quickly
  • Mohamed El-Erian of Allianz writes today that the FOMC rate decision, due out on Wednesday, is unlikely to roil markets
  • Yield Check:
    • 2-yr: +2 bps to 1.38%
    • 5-yr: +5 bps to 1.87%
    • 10-yr: +5 bps to 2.31%
    • 30-yr: +6 bps to 2.89%

 
7/25/2017
10:09:20 ET
10-Year:-16/32 2.31    GNMAs:     EUR/USD:1.1689    USD/JPY:111.56   

Treasuries Widen Losses

  • The U.S. Treasury market remains significantly lower this morning as WTI crude adds 2.20% to $47.36/bbl. and the S&P 500 rallies 0.29% to 2,477.1. The Conference Board's Consumer Confidence Index jumped to 121.1 in July from 118.9 in June. The Briefing.com consensus was 116.8
    • Expectations rose to 103.3 from 99.6
    • The Present Situation Index rose to 147.8 from 143.9
  • The $26 bln 2-year Treasury auction is still on deck
  • The housing market data that was released at 09:00 ET was a bit weaker than expected but not by much
  • The Richmond Fed's Manufacturing Index jumped to 14 in July (prior 7)
  • Yield Check:
    • 2-yr: +2 bps to 1.38%
    • 5-yr: +5 bps to 1.87%
    • 10-yr: +5 bps to 2.31%
    • 30-yr: +6 bps to 2.90%

 
7/25/2017
9:13:43 ET
10-Year:-13/32 2.30    GNMAs:     EUR/USD:1.1707    USD/JPY:111.48   

Yield Curve Steepens

  • U.S. Treasuries are trading with pretty serious losses considering that we are not even one hour through the U.S. day session. The S&P 500 is set for a higher open at 2,476.5, up seven points from Monday's close, as companies like Caterpillar and McDonald's report stronger-than-expected results. The U.S. Dollar Index is down 0.30% to 93.70 as President Trump tweeted that his administration would pursue a free trade deal with the U.K. WTI crude is higher by 1.99% at $47.27/bbl. Bloomberg notes today that the physical market has been firming up even as futures prices have remained weak. On this page, we have been noting that the steady flow of negative news for oil has not been confirmed with lower prices in recent weeks. Gold is losing 0.20% to $1,251.9/troy oz.
  • The S&P/Case-Shiller 20-city Home Price Index rose by 5.7% y/y in May, in line with the Briefing.com consensus. April's growth was 5.7% too
  • The FHFA Housing Price Index was up 0.4% m/m in May, missing the Briefing.com consensus of 0.7%. April saw growth of 0.6%
  • The Grey Lady has a good piece on sluggish productivity growth and whether or not it might be reversed with higher wages, which might pressure businesses to invest in capital
  • Yield Check:
    • 2-yr: unch at 1.37%
    • 5-yr: +4 bps to 1.86%
    • 10-yr: +4 bps to 2.30%
    • 30-yr: +5 bps to 2.88%

 
7/25/2017
8:39:54 ET
10-Year:-8/32 2.28    GNMAs:     EUR/USD:1.1694    USD/JPY:111.35   

Greece Returns to Bond Market After 3-Year Hiatus

  • European sovereign debt is trading lower today as strong equity markets and higher oil prices raise the likely path for inflation and therefore central banks' policy rates. The German 10-year bund yield remains over the psychologically important 0.50% level although bonds of the eurozone periphery have performed better in recent weeks. Portugal's 10-year PGB yield is down to 2.90%, near a 52-week low, as sentiment surrounding the future of the eurozone improves. The Greek government is returning to the bond market today after a three-year exile, selling 5-year notes for a projected 4.75% yield. The International Monetary Fund is now likely to participate in the bailout and just agreed to a new $1.8 bln conditional loan on Thursday, so that is encouraging investors to participate in the offering
  • The euro and British pound have jumped against the U.S. dollar in recent trades as U.S. President Trump tweeted that he is working on a major trade deal with the U.K. The dollar has been very weak this year and BNP Paribas finally threw in the towel on its bullish dollar call today. The point is that the euro has a tailwind and a tweet that may or may not see any follow-through is just an excuse to push markets along the path of least resistance. 
  • European Economic Data:
    • In the U.K., the CBI Industrial Trends Orders fell more than expected to 10 for July (prior 16)
    • Germany's Ifo Business Climate Index unexpectedly rose to 116.0 in July (prior 115.2)
      • The Current Assessment gauge rose to 125.4 (prior 124.2)
      • The Business Expectations measure climbed to 107.3 (prior 106.8)
    • Germany's Import Price Index fell by 1.1% m/m in June, missing estimates (+2.5% y/y) (prior -1.0% m/m)
    • The French Business Survey unexpectedly remained at 109 in July (prior 108)
    • Italian Industrial New Orders were up 4.3% m/m in May (13.7% y/y) (prior -0.5% m/m)
      • Italian Industrial Sales rose 1.5% m/m in May (7.6% y/y) (prior -0.4% m/m)
    • Spain's producer price index was up 3.2% y/y in June (prior 5.3%)
    • Poland's unemployment rate fell more than expected to 7.1% in June (prior 7.4%)
      • Retail sales growth there was finalized at 6.0% y/y in June (prior 6.0%)
    • Sweden's producer price index was up 4.8% y/y in June (prior 7.2%)
    • In Belgium, industrial production fell by 1.6% m/m in May (prior 0.2%)
  • New Issuance:
    • The U.K.'s Debt Management Office sold GBP2.5 bln of 30-year gilts with an average yield of 1.827% and a bid-to-cover ratio of 2.17. The auction tailed by 0.1 bps
  • Yield Check:
    • France, 10-yr OAT: +2 bps to 0.77%
    • Germany, 10-yr bund: +2 bps to 0.53%
    • Greece, 10-yr note: +1 bp to 5.08%
    • Italy, 10-yr BTP: +4 bps to 2.08%
    • Portugal, 10-yr PGB: +2 bps 2.90%
    • Spain, 10-yr ODE: +2 bps to 1.49%
    • U.K., 10-yr gilt: +2 bps to 1.20%

 
7/25/2017
7:43:35 ET
10-Year:-5/32 2.27    GNMAs:     EUR/USD:1.1657    USD/JPY:111.43   

Treasuries Slide on Oil Rally

  • The U.S. Treasury market is set to open lower again this morning as oil prices and global equity indices advance. The economic data released overnight showed that German business confidence is improving and that the U.K.'s factory sector growth is at a 22-year high. The Greek government is going to market today with an offering of 5-year debt and is said to have received orders for EUR7 bln. The yield looks likely to be nearer to 4.75% than the previously forecast 4.875%. The U.S. economic data lineup is fairly light but there is a 2-year note auction at 13:00 ET. The S&P 500 is set to open up six points to 2,475.5 and the U.S. Dollar Index is down 0.02% at 93.96
  • Yield Check:
    • 2-yr: unch at 1.37%
    • 5-yr: +1 bp to 1.84%
    • 10-yr: +2 bps to 2.27%
    • 30-yr: +2 bps to 2.85%
  • International News:
    • Korea's Consumer Confidence Index remained at 111 in July
    • The two new members of the Bank of Japan's nine-member board said that debating an exit from monetary stimulus now would be dangerous and that the 2% inflation goal should be achieved quickly
    • Germany's Ifo Business Climate Index unexpectedly rose to 116.0 in July (prior 115.2)
      • The Current Assessment gauge rose to 125.4 (prior 124.2)
      • The Business Expectations measure climbed to 107.3 (prior 106.8)
    • Germany's Import Price Index fell by 1.1% m/m in June, missing estimates (+2.5% y/y) (prior -1.0% m/m)
    • The French Business Survey unexpectedly remained at 109 in July (prior 108)
    • Italian Industrial New Orders were up 4.3% m/m in May (13.7% y/y) (prior -0.5% m/m)
      • Italian Industrial Sales rose 1.5% m/m in May (7.6% y/y) (prior -0.4% m/m)
    • Spain's producer price index was up 3.2% y/y in June (prior 5.3%)
    • In the U.K., the CBI Industrial Trends Orders fell more than expected to 10 for July (prior 16)
  • Data out Today:
    • May FHFA Housing Price Index (09:00 ET)
    • May S&P Case-Shiller Home Price Index (09:00 ET)
    • July Consumer Confidence Index (10:00 ET)
  • Treasury Auction:
    • $26 bln 2-year Treasury auction (results at 13:00 ET)

 
7/24/2017
3:24:03 ET
10-Year:-4/32 2.25    GNMAs:     EUR/USD:1.1645    USD/JPY:111.11   

Treasuries Retreat from Multi-Week Highs

  • U.S. Treasuries ended today's session with modest losses as higher oil prices encouraged the government bond bulls to take profits off of the table following a strong two-week rally. The only major U.S. economic data was the Existing Home Sales report for June. Home sales came up slightly short as dwindling inventory continued to push prices out of reach for many would-be buyers. The FOMC's July meeting begins on Tuesday and the committee is widely expected to keep policy on hold when it announces its decision on Wednesday. Tomorrow's session also kicks off this week's auctions with $26 bln of 2-year notes. The S&P 500 is down 0.03% to 2,471.8 and the U.S. Dollar Index is higher by 0.13% at 93.98
  • Yield Check:
    • 2-yr: +2 bps to 1.36%
    • 5-yr: +2 bps to 1.82%
    • 10-yr: +1 bp to 2.25%
    • 30-yr: +2 bps to 2.83%
  • News:
    • U.S. existing home sales fell by 1.8% m/m in June to 5.52 mln from 5.62 mln in May. The Briefing.com consensus was for a smaller decline to 5.58 mln
      • Tight supply helped push the median selling price up 6.5% y/y to $263,800
      • The number of homes on the market fell to 1.96 mln, down 7.1% y/y
    • The Markit Services PMI remained at 54.2 in July, according to preliminary data. Economists had expected a decline
    • The Markit Manufacturing PMI rose to 53.2 in July from 52.0 in June. Economists had expected no change
    • The St. Louis Fed Financial Stress Index fell to -1.505 for the week ending July 20
  • Commodities:
    • WTI crude: +1.29% to $46.36/bbl. 
    • Gold: -0.02% to $1,254.6/troy oz.
    • Copper: +0.66% to $2.7405/lb.
  • Currencies:
    • EUR/USD: -0.15% to 1.1645
    • USD/JPY: -0.02% to 111.11
  • Data out Tomorrow:
    • May FHFA Housing Price Index (09:00 ET)
    • May S&P Case-Shiller Home Price Index (09:00 ET)
    • July Consumer Confidence Index (10:00 ET)
  • Treasury Auction:
    • $26 bln 2-year Treasury auction (results at 13:00 ET)