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Update: 2015-11-27 15:55:12 ET

Moving the Market

--No US data today

--Early market close at 2:00 p.m. ET

--Shanghai Composite -5.5% with brokerages being investigated for allegedly breaking trading rules

--Waiting for important developments in the week ahead

2:00:57 ET
10-Year:+3/32 2.22    GNMAs:     EUR/USD:1.0600    USD/JPY:122.86   

Call It Mixed

  • The Treasury market closed Friday's session looking like the stock market did: mixed and little changed.  More of the buying interest (what little there was) was concentrated in shorted-dated securities while longer-dated instruments sort of just sat there.
    • 2-yr -2 bps at 0.92%
    • 5-yr -2 bps at 1.65%
    • 10-yr -1 bp at 2.22%
    • 30-yr unch at 3.00%

  • The trading action was uneventful, which is not surprising given that it was an abbreviated session following Thursday's Thanksgiving holiday.  The lack of any geopolitical upset also allowed for a pretty tame session.

  • There was also a wait-and-see element at work with traders cognizant that the coming week is going to contain a host of important developments:
    • The IMF decision Monday on whether China's currency will be included in its Special Drawing Rights basket
    • Several speaking engagements by Fed Chair Yellen, including her monetary policy testimony before the Joint Economic Committee on Thursday
    • Manufacturing PMI reports from around the globe
    • Central bank policy meetings for the Reserve Bank of Australia (Monday), the Reserve Bank of India (Tuesday), the Bank of Canada (Wednesday), and the European Central Bank (Thursday)
    • OPEC's meeting on Friday; and
    • The November Employment Situation Report on Friday

  • Friday's excitement was reserved primarily for the currency and commodity markets.
    • The US Dollar Index traded as high as 100.20 with the euro and the Swiss franc weakening noticeably in front of next week's ECB meeting; however, the euro recouped just about everything it lost, which dropped the US Dollar Index back to 100.02.
    • With the greenback's strength fading, there was no reprieve for oil prices.  They settled down 3.1% at $41.71 per barrel.  Gold also got hit, falling 1.3% to $1056.20 and suffering its sixth straight weekly decline.

1:06:06 ET
10-Year:+3/32 2.22    GNMAs:     EUR/USD:1.0600    USD/JPY:122.82   


  • Treasuries are in fade mode now, having been unable to build on earlier gains.  There hasn't been any specific news catalyst driving the recent selling interest, so it could just be a case of squaring things off before week's end or month's end for that matter.
    • 2-yr unch at 0.94%
    • 5-yr -1 bps at 1.66%
    • 10-yr -1 bp at 2.22%
    • 30-yr +1 bp at 3.00%

  • Notably, oil keeps sliding.  The $42.00/bbl mark has given way and now oil is crossing at $41.91, down 2.6% for the session.

  • Next week will be a week chock full of market-moving items.  Focal points in that respect will include:
    • The IMF decision Monday on whether China's currency will be included in its Special Drawing Rights basket
    • Several speaking engagements by Fed Chair Yellen, including her monetary policy testimony before the Joint Economic Committee on Thursday
    • Manufacturing PMI reports from around the globe
    • Central bank policy meetings for the Reserve Bank of Australia (Monday), the Reserve Bank of India (Tuesday), the Bank of Canada (Wednesday), and the European Central Bank (Thursday)
    • OPEC's meeting on Friday; and
    • the November Employment Situation Report on Friday

11:54:33 ET
10-Year:+5/32 2.22    GNMAs:     EUR/USD:1.0596    USD/JPY:122.83   


  • There has been little change in the Treasury market in what has been an otherwise quiet session.

  • Yield check:
    • 2-yr -2 bps at 0.92%
    • 5-yr -3 bps at 1.64%
    • 10-yr -2 bps at 2.22%
    • 30-yr unch at 2.99%

  • European equity markets faded in late action and closed their trading sessions with modest losses.  Major indices in the US are little changed, although the small-cap Russell 2000 (+0.4%) continues to exhibit relative strength.

  • Oil prices sitting right at $42.00/bbl, down 2.4% on the session

  • EUR/USD (1.0596) trying to claw its way back from larger losses, currently down 0.1%, after hitting 1.0578 earlier in the day

11:12:40 ET
10-Year: 2.215%    GNMAs:     EUR/USD:1.0595    USD/JPY:122.77   

Markets Speculate on SNB Intervention: The Dollar Index is maintaining the 100 level but it has yet to test the multi-year high of 100.39 set back on March 13. It has been a quiet session as is typical of the post-Thanksgiving Friday. News out over Thanksgiving was light with headlines about the on-going feud between Russia and Turkey over the downed jet and the China 5% decline being the most notable. None of these are having a major impact on trade. Next week, Fed Chair Janet Yellen will speak (Tue & Wed), the Fed Beige book is due out (Wed), and the November Jobs Report (Fri) will be closely followed events.

  • The euro is battling to hold the 1.06 level ahead of next week's ECB meeting (Thu). The central bank is expected to expand its current QE program in an attempt to boost growth and pricing. This will remain a significant headwind for the single currency.
  • The pound is holding the 1.50 level at the moment. The country did not see any revision to its Q3 GDP number which was up 0.5% q/q.
  • The yen continues to trade in the 122-123 area. The country saw its Unemployment Rate fall to 3.1% (from 3.4% in prior) and had a small beat on the CPI. But the inflation gauge remains well below the Bank of Japan's target. Household Spending in the region fell short of expectations.
  • The Swiss franc has been garnering attention this morning following its sudden decline at the open of European trade. The franc fell from 1.0230 to 1.0320 against the dollar. Against the euro it dropped from 1.0860 to 1.0920. The moves led to speculation that the SNB was back intervening in the currency. This would mark the first move by the central bank since it surprised markets and removed its 1.20 peg against the euro currency. The theory here is that the SNB is moving to protect its currency ahead of next week's ECB meeting.

10:24:57 ET
10-Year:+4/32 2.22    GNMAs:     EUR/USD:1.0576    USD/JPY:122.75   

Holding Up

  • Treasuries for the most part continue to exhibit a positive bias, although early gains for the 30-yr bond have disappeared.  Buying interest concentrated primarily in front and belly of curve; however, the 10-yr note is keeping pace.
    • 2-yr -2 bps at 0.91%
    • 5-yr -3 bps at 1.64%
    • 10-yr -2 bps at 2.22%
    • 30-yr unch at 2.99%

  • Major stock indices are mixed and little changed at this point in what is expected to be a lightly-traded session

  • Oil prices continue to act heavy.  Crude currently down 2.0% at $42.18/bbl with continued dollar strength helping to keep a lid on things.

8:59:36 ET
10-Year:+8/32 2.21    GNMAs:     EUR/USD:1.0578    USD/JPY:122.69   

European Update

  • European sovereigns continue to exhibit a positive bias
    • German bund -3 bps at 0.44%
    • Italian BTP -4 bps at 1.29%
    • Spanish Bonos -6 bps at 1.51%
    • French OAT -5 bps at 0.76%
    • UK Gilt -3 bps at 1.81%

  • A look at today's data:
    • Eurozone November Consumer Confidence -6.0 (expected -8.0; prior -8.0) and November Business and Consumer Survey 106.1 (expected 105.9; prior 106.1)
    • Germany's December GfK Consumer Climate 9.3 (expected 9.2; last 9.4) and October Import Price Index -4.1% year-over-year (consensus -3.9%; prior -4.0%)
    • UK's preliminary Q3 GDP +0.5% quarter-over-quarter, as expected; +2.3% year-over-year, as expected. Separately, Q3 Business Investment +2.2% quarter-over-quarter (consensus 1.5%; last 1.6%)
    • France's October PPI +0.2% (prior +0.1%) and October Consumer Spending -0.7% month-over-month (expected -0.1%; last 0.1%)
    • Italy's November Business Confidence 104.6 (consensus 105.6; last 105.7) and Consumer Confidence 118.4 (expected 116.5; previous 117.0)
    • Spain's CPI +0.3% month-over-month (expected 0.2%; previous 0.6%); -0.3% year-over-year (consensus -0.5%; last -0.7%)

  • EUR/USD -0.3% at 1.0578 and pushing its weakest level since March

7:58:19 ET
10-Year:+9/32 2.20    GNMAs:     EUR/USD:1.0583    USD/JPY:122.63   

No Turkey Hangover

  • Treasuries have caught an early bid with yields pressing lower through the overnight session.  A sharp selloff in China's Shanghai Composite (-5.5%), which followed news of some brokerages being investigated for alleged violations of trading rules, fostered some flight-to-quality interest.  Additionally, there was some disappointment in reports that China's industrial profits declined 4.6% year-over-year in October and that Japan's household spending declined 2.4% year-over-year in October, playing into worries about a global slowdown.

  • Yield Check:
    • 2-yr -2 bps at 0.91%
    • 5-yr -3 bps at 1.64%
    • 10-yr -3 bps at 2.20%
    • 30-yr -2 bps at 2.97%

  • Thankfully, there were no terrorist incidents over the Thanksgiving holiday

  • European sovereigns have also caught a bid in the wake of a spate of mixed data and continued speculation next week's ECB meeting will feature an announcement of increased policy stimulus
    • UK Gilt -3 bps at 1.81%
    • German Bund -3 bps at 0.44%
    • French OAT -5 bps at 0.75%
    • Italian BTP -5 bps at 1.27%
    • Spanish Bonos -7 bps at 1.50%

  • US Dollar showing some continued strength against the euro, which has helped push the US Dollar Index back above 100.00 (currently +0.3%) at 100.08).  Notable weakness in the Swiss franc, though, is also playing a part.  There are reports the Swiss central bank might be playing a role there in anticipation of the euro weakening further on added policy stimulus by the ECB.
    • EUR/USD -0.2% at 1.0583
    • USD/JPY unch at 122.63
    • USD/CHF +0.6% at 1.0298

  • Dollar strength remains an overhang for most commodities
    • Crude oil -1.8% at $42.25/bbl
    • Gold -0.5% at $1064.10/troy oz.
    • Copper +1.7% at $2.08/lb.

  • No US data today

  • Treasury market closing early at 2:00 p.m. ET while stocks set to close at 1:00 p.m. ET

2:50:50 ET
10-Year:+2/32 2.23    GNMAs:     EUR/USD:1.0618    USD/JPY:122.74   


  • The Treasury market had a relatively uneventful day, fluttering a bit after a barrage of economic data in the morning but ultimately ending the session little changed

  • Trading from the front end to the back end featured narrow ranges that saw a slight selling bias at the front and a slight buying bias at the back
    • 2-yr unch at 0.93%
    • 5-yr unch at 1.66%
    • 10-yr -1 bp at 2.23%
    • 30-yr -1 bp at 2.99%

  • The tenor of things was not entirely unusual from recent action as the front end continued to be driven by expectations that the Federal Reserve is on track to raise the target range for the federal funds rate at its December 15-16 meeting for the first time since June 2006
    • Fed funds futures show a 78% probability of a rate hike at the December meeting versus 52% a month ago

  • Today's data was mixed, yet it failed to dispel the December rate hike notion that has seen the 2-yr yield climb 40 basis points in the last five weeks
  • The barrage of data played out as follows:
    • Initial Claims: Actual 260K, consensus 272K, Prior 272K (from 271K)
    • Continuing Claims: Actual 2207K, consensus 2164K, Prior 2173K (from 2175K)
    • October Personal Income: Actual 0.4%, consensus 0.4%, Prior 0.2% (from -0.1%)
    • October Personal Spending: Actual 0.1%, consensus 0.3%, Prior 0.1%
    • October Core PCE Prices: Actual 0.0%, consensus 0.2%, Prior 0.2%
      • Core PCE +1.3% year-over-year while overall PCE Price Index up just 0.2%
    • October Durable Orders: Actual 3.0%, consensus 1.5%, Prior -0.8% (from -1.2%)
    • October Durable orders, Ex Transportation: Actual 0.5%, consensus 0.5%, Prior -0.1% (from -0.6%)
    • November Michigan Sentiment - Final: Actual 91.3, consensus 93.1, Prior 93.1
    • October New Home Sales: Actual 495K, consensus 504K, Prior 447K (from 468K)

  • There was a good bit of action in the currency market.  The dollar benefited from some flight-to-safety interest at the expense of the yen and the euro. The US Dollar Index for its part traded above the 100.00 level briefly but ran into round-number resistance and ended off its session high at 99.82
    • USD/JPY +0.2% at 122.74
    • EUR/USD -0.4% at 1.0618

  • The strong dollar acted as a weight on commodity prices, yet they bounced back, particularly oil, which also some increased buying interest after the weekly inventory report and the news that rig count dropped by 13 to 744 in the most recent reading
    • Crude, which flirted with breaking $42.00/bbl early, settled the day up 0.2% at $43.00/bbl

  • As a reminder, the Treasury market will be closed on Thursday in observance of the Thanksgiving holiday and will close early at 2:00 p.m. ET on Friday