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Update: 2016-05-05 15:55:13 ET

Moving the Market
  • April Challenger Job Cuts: Actual +35% m/m, Prior +31.7% 
  • Initial Jobless Claimsfor the week ending 4/30: Actual 274K, Briefing.com consensus 259K, Prior 257K
  • Continuing Jobless Claims for the week ending 4/23: Actual 2122K, Prior 2130K
  • Natural Gas Inventories for the week ending 4/30: Actual +68 bcf, Prior +73 bcf
  • St.Louis Fed President Bullard (FOMC voter): Undecided on right path for monetary policy; June is live; worried that market's opinion on number and timing of hikes differs from the Fed's; financial market stress is easing, strong dollar effect is waning
  • San Francisco Fed President William (non-FOMC voter) said that the U.S. economy is in a very good place and that two or three rate hikes this year is reasonable
  • Dallas Fed PresidentKaplan (non-FOMC voter) panel on 'International Monetary Policy and Reform inPractice (19:15 ET)

5/5/2016
3:36:10 ET
10-Year:+9/32 1.74    GNMAs:     EUR/USD:1.1401    USD/JPY:107.28   

Treasuries Rally as Oil Gives Back Gains

  • U.S. Treasuries traded higher today as the S&P 500 lost 0.09% to 2,049.2 and the U.S. Dollar Index rallied 0.62% to 93.76. The economic data releases were not too significant, but initial jobless claims did tick up to a five-week high of 274K, perhaps adding to concerns about the employment front after Wednesday's disappointing release of the April ADP Employment Change. San Francisco Fed President Williams, who does not vote on the FOMC this year, said that two or three rate hikes are still possible this year. St. Louis Fed President Bullard, who does vote on the FOMC, said that the global headwinds to U.S. growth have eased and that June is a live meeting. A wildfire near a Canadian oil hub caused WTI crude to trade up sharply overnight but the gains melted away as the session progressed
  • Yield Check:
    • 2-yr: -2 bps to 0.73%
    • 5-yr: -4 bps to 1.20%
    • 10-yr: -3 bps to 1.74%
    • 30-yr: -3 bps to 2.60%
  • News:
    • Initial jobless claims rose to 274K for the week ending April 30, above the Briefing.com consensus of 259K. Initial claims were 257K for the week ending April 23
      • Continuing jobless claims for the week ending April 23 were 2122K, down from the prior reading of 2130K
    • A wildfire around Fort McMurray, Canada's oil sands hub, is set to reduce Canadian oil production by several hundred thousand barrels/day and that pushed WTI crude for June delivery as high as $46.07/bbl.     
    • St. Louis Fed President Bullard, who votes on the FOMC this year, said today that global headwinds to the U.S. economic and inflation outlooks have eased. He went on to say that June is a live meeting although Bullard himself is undecided on the proper path of monetary policy at this point
    • San Francisco Fed President John Williams, who does not vote on the FOMC this year, said that two or three rate hikes this year is reasonable and that the U.S. economy is in a very good place  
  • Commodities:
    • WTI crude: +1.42% to $44.40/bbl.
    • Gold: +0.31% to $1,278.3/troy oz.
    • Copper: -1.67% to $2.15/lb.
  • Currencies:
    • EUR/USD: -0.80% to 1.1401
    • USD/JPY: +0.30% to 107.26
  • Data out Friday:
    • April Employment Situation Report (08:30 ET)
    • March ConsumerCredit (15:00 ET)    

 
5/5/2016
3:14:53 ET
10-Year:+9/32 1.75    GNMAs:     EUR/USD:1.1402    USD/JPY:107.23   

Dollar Rallies for Third-Straight Win

  • The U.S. Dollar Index jumped 0.65% to 93.78 today with most of the gains in the buck coming against the euro and the Swiss franc. The selling in the single currency came as the ECB issued a very pessimistic outlook for inflation  
  • EUR/USD: -0.82% to 1.1402
    • The European Central Bank issued its latest economic bulletin which said, in part, "that underlying inflation [in the eurozone] has not gathered upward momentum since last summer."
  • GBP/USD: -0.18% to 1.4478
    • The U.K.'s services PMI fell more than expected to 52.3 in April from 53.7 in March. April's reading was the lowest since February 2013 and was widely attributed to the upcoming referendum on membership in the European Union (set for June 23)
  • USD/CHF: +1.21% to 0.9686
  • USD/JPY: +0.27% to 107.23
  • USD/CAD: -0.01% to 1.2861
    • Canadian building permits fell by a worse-than-expected 7.0% m/m in March, partially reversing the 15.3% jump in February
  • AUD/USD: -0.09% to 0.7460
    • Australian retail sales rose 0.4% m/m in March, better than both expectations and the 0.1% growth in February
  • NZD/USD: -0.14% to 0.6881

 
5/5/2016
1:50:53 ET
10-Year:+5/32 1.76    GNMAs:     EUR/USD:1.1404    USD/JPY:107.24   

Stocks Break Down

  • Treasuries have pushed to fresh highs and now backed off as the S&P 500 loses 0.14% to 2,048.2. WTI crude is now up just 1.26% to $44.33/bbl. as the Alberta wildfire-rally appears to have exhausted some of the short-covering in oil markets. There's one last line in the sand for Treasury yields, with the 30-year yield now through its 200-hour moving average. By our reckoning, the new support level is in the low 2.50's, the backside of the broken downtrend. The U.S. Dollar Index remains up 0.62% to 93.76
  • San Francisco Fed President John Williams, who does not vote on the FOMC this year, said that two or three rate hikes this year is reasonable and that the U.S. economy is in a very good place
  • Yield Check:
    • 2-yr: -1 bp to 0.73%
    • 5-yr: -3 bps to 1.12%
    • 10-yr: -2 bps to 1.76%
    • 30-yr: -1 bp to 2.62%
  • 30-Year Yield (Hourly):


 
5/5/2016
12:58:08 ET
10-Year:+3/32 1.76    GNMAs:     EUR/USD:1.1411    USD/JPY:107.29   

Stocks Hang in with Small Gains

  • U.S. Treasuries remain on highs early this afternoon ahead of Friday's 08:30 ET release of the April Employment Situation Report
  • The S&P 500 sits up 0.19% to 2,055 and WTI crude is up 2.42% to $44.84/bbl.
  • The U.S. Dollar Index is up 0.58% to 93.72
  • Gold is up 0.27% to $1,277.9/troy oz.
  • Yield Check:
    • 2-yr: -1 bp to 0.73%
    • 5-yr: -2 bps to 02 bps to 1.22%
    • 10-yr: -1 bp to 1.76%
    • 30-yr: -1 bp to 2.62%

 
5/5/2016
12:05:18 ET
10-Year:+1/32 1.77    GNMAs:     EUR/USD:1.1406    USD/JPY:107.32   

Short Sellers Bail Ahead of Unemployment

  • The Treasury complex is sitting on highs at the moment despite a mid-morning rally from the S&P 500 to 2,057.1, up 0.30% on the session. WTI crude has given back a lot of its gains from the Alberta wildfire but is still up 2.63% to $44.93/bbl. The U.S. Dollar Inex is up 0.61% to 93.75 and gold has pulled back $10.20 from its high to trade up 0.30% at 1,278.2/troy oz.
  • St. Louis Fed President Bullard, who votes on the FOMC this year, said today that global headwinds to the U.S. economic and inflation outlooks have eased. He went on to say that June is a live meeting although Bullard himself is undecided on the proper path of monetary policy at this point. Bullard did an interview that was published Wednesday in the New York Times (see 09:28 ET comment)
  • Yield Check:
    • 2-yr: -1 bp to 0.73%
    • 5-yr: -1 bp to 1.23%
    • 10-yr: -1 bp to 1.77%
    • 30-yr: -1 bp to 2.63%

 
5/5/2016
11:06:31 ET
10-Year:-06/32 1.782%    GNMAs:     EUR/USD:1.1404    USD/JPY:107.29   

Dollar Bounces Ahead of Jobs: The Dollar Index is pressing back toward the 94 level as it continues its bounce from multi-month lows set on Tuesday. The DXY is now up 2% since its early swoon. Economic data disappointed with Initial Claims coming in worse than expected. This follows the miss for ADP and will weigh on expectations for tomorrow's jobs number. Of greater importance to the dollar though will be the Fed speakers today starting with Bullard (11:30am) and continuing on when Williams, Kapaln, and Lockhart speak tonight at 7:15pm. Fed speakers have been striking a hawkish tone on a June rate hike but it is evident that the markets are not buying it as the Fed Funds Futures expectations still sit at 12% for a June move. 94 will also set up as staunch resistance for the current bounce.

  • The euro is giving up some of its recent gains as it slides back from 1.15 to re-test 1.14. This level provided plenty of resistance over the back half of 2015 and the first quarter of 2016. Now we will see if it has turned into a key support level for the single currency. The majority of Europe saw bank holidays today which has kept volume low.
  • The pound is sitting on the 1.45 area. The U.K. is in the midst of 'Super Thursday' which holds a key set of elections including the race for London mayor. Markets will be watching closely to parse through the winners and losers and what the potential fall out may be for the Brexit vote.
  • The yen continues to trade around 107. Japanese markets have been closed for the past three days for a variety of holidays. So the moves tomorrow will be watched closely after the current 'quiet period'.

 
5/5/2016
11:03:57 ET
10-Year:-2/32 1.78    GNMAs:     EUR/USD:1.1404    USD/JPY:107.33   

Markets Drift Ahead of Friday's Jobs Report

  • Treasuries are back on highs this morning as equities trade sideways and WTI crude gives back a chunk of its Alberta wildfire-fueled gains, now up just 2.70% to $44.96/bbl. The S&P 500 is up 0.23% to 2,055.8. The U.S. Dollar Index is near its session high, up 0.64% to 93.78
  • Yield Check:
    • 2-yr: unch 0.74%
    • 5-yr: unch at 1.24%
    • 10-yr: +1 bp to 1.78%
    • 30-yr: +bp to 2.64%

 
5/5/2016
10:07:51 ET
10-Year:-6/32 1.80    GNMAs:     EUR/USD:1.1406    USD/JPY:107.43   

Yields Move Higher

  • Treasuries are pulling back this morning as the S&P 500 advances 0.30% to 2,057.3. WTI crude is up 4.18% to $45.63/bbl. and the U.S. Dollar Index is up 0.65% to 93.78. Gold is up 0.68% to $1,283.1/troy oz.
  • Yield Check:
    • 2-yr: +1 bp to 0.75%
    • 5-yr: +2 bps tp 1.26%
    • 10-yr: +2 bps to 1.80%
    • 30-yr: +2 bps to 2.65%
  • Odds of a 25-basis point rate hike by the end of following meetings, according to CME FedWatch:
    • June: 13%
    • July: 28%
    • September: 41%
    • November: 44%
    • December: 60%
  • 30-Year Yield (Hourly): We said on Wednesday that the ADP Employment Change miss was the kind of report that could hurt investor confidence enough -- by calling into question a formerly reliable piece of the recovery -- to put in a short-term bottom in risky assets and yields.The S&P 500 narrowly missed support at its 50-day moving average yesterday at 2,040.8 and we have higher support at 2,055 in the index. This chart shows that the 30-year yield is holding above its 200-hour moving average

 
5/5/2016
9:28:41 ET
10-Year:-1/32 1.78    GNMAs:     EUR/USD:1.1435    USD/JPY:107.02   

Job Market Moves to Forefront

  • Treasuries are near the unchanged market this morning as the S&P 500 heads for a 0.26% gain to 2,056.9 at the open. WTI crude has backed off of its $46.07 high and now trades up 4.02% to $45.54/bbl. The U.S. Dollar Index is up 0.36% to 93.52 and gold is up 0.85% to $1,285.2/troy oz.
  • The miss on Wednesday's release of the ADP Employment Change for April, coupled with today's uptick in initial jobless claims, is buoying Treasuries near multi-week highs ahead of Friday's release of the April Employment Situation Report. A strong job market has been the one reliable factor in the U.S. recovery, even as growth has remained tepid. If the strongest leg of the stool is swept away and the U.S. economy enters recession rather than rebounding from Q1's dismal growth (0.5% annualized rate), the Fed could arguably be on hold for years
  • St. Louis Fed President James Bullard (FOMC voter) will speak at 11:50 ET. The New York Times published an interview with Bullard on Wednesday, in which he said:
    • "...you'd think the economy is pretty big and diverse and we'd be able to overcome [energy and manufacturing sector] challenges. And that doesn't seem to be happening...I'm taking a little more signal than I would have taken in the past from the weak G.D.P. growth."
    • He said that the Brexit referendum (June 23) is "less of an international macroeconomic event" because it's scheduled and the result will take effect over years. To Bullard, that means that it is less significant than the Chinese devaluation last August, for example 
    • "I think the main issue from a data perspective is that the tension between slow economic growth and relatively strong labor market data is becoming more intense."
  • Yield Check:
    • 2-yr: unch at 0.74% 
    • 5-yr: unch at 1.24% 
    • 10-yr: unch at 1.78%
    • 30-yr: +1 bp to 2.64%

 
5/5/2016
8:46:37 ET
10-Year:-3/32 1.79    GNMAs:     EUR/USD:1.1427    USD/JPY:106.97   

Treasuries Modestly Lower but Steady

  • Initial jobless claims rose to 274K for the week ending April 30, above the Briefing.com consensus of 259K. After the weaker-than-expected ADP Employment Change for April was released on Wednesday, investors may be more sensitive to initial claims data, which have heretofore not confirmed the weakness in the ADP report. Initial claims were 257K for the week ending April 23
    • Continuing jobless claims for the week ending April 23 were 2122K, down from the prior reading of 2130K
  • Treasuries traded higher after the release but have now settled down and are slightly lower on the session. The S&P 500 is set to open up 0.35% to 2,058.4
  • WTI crude is pinned to its high on the wildfire news out of Alberta and the entire province is now under a state of emergency. Estimates for the cut to supply were around 800K barrels/day
    • WTI crude: +4.66% to $45.82/bbl.
  • Gold is up 0.91% to $1,285.8/troy oz. and the U.S. Dollar Index is up 0.37% to 93.53
  • Yield Check:
    • 2-yr: unch at 0.75%
    • 5-yr: +1 bps to 1.24%
    • 10-yr: +1 bp to 1.79%
    • 30-yr: +1 bp to 2.65%
  • 10-Year Yield (15-Minute Bars):

 
5/5/2016
8:26:37 ET
10-Year:-6/32 1.80    GNMAs:     EUR/USD:1.1432    USD/JPY:107.11   

Eurozone Yields Mixed as ECB Says Inflation to Stay Low

  • European sovereign yields are mixed this morning with the eurozone core outperforming the eurozone periphery after the European Central Bank issued its latest economic bulletin. The report said that 'most measures of underlying inflation do not show any clear upward trend.' The report went on to say that the appreciating euro is "mitigating some of the upward price pressure stemming from its earlier strong depreciation." and that market expectations for inflation from 2021-2026 (5-year, 5-year forward) remain at very low levels
  • The U.K.'s services PMI fell more than expected to 52.3 in April from 53.7 in March. April's reading was the lowest since February 2013 and was widely attributed to the upcoming national referendum on membership in the European Union (set for June 23)
  • The European Central Bank issued its latest economic bulletin which said, in part, "that underlying inflation [in the eurozone] has not gathered upward momentum since last summer." The euro is down sharply against the U.S. dollar this morning (EUR/USD: -0.61% to 1.1419)
  • Yield Check:
    • France, 10-yr OAT: -1 bp to 0.56%
    • Germany, 10-yr Bund: -2 bps to 0.19%
    • Greece, 10-yr note: unch at 8.43%
    • Italy, 10-yr BTP: +2 bps to 1.51%
    • Portugal, 10-yr PGB: +2 bps to 2.99%
    • Spain, 10-yr ODE: +1 bp to 1.60%
    • U.K., 10-yr Gilt: -2 bps to 1.51%

 
5/5/2016
7:38:59 ET
10-Year:-5/32 1.80    GNMAs:     EUR/USD:1.1419    USD/JPY:107.28   

Treasuries Pull Back as Oil Jumps 

  • U.S. Treasuries are losing ground this morning as WTI crude has raced higher (+3.11% to $45.14/bbl.) due to a wildfire near a Canadian oil transportation hub and the S&P 500 futures point to an open up 0.38% to 2,059.1 for the index. The U.S. Dollar Index is up 0.51% to 93.66 as the euro and Swiss franc fall sharply against the greenback following a gloomy inflation outlook from the European Central Bank. Today's U.S. economic data schedule is light ahead of Friday morning's release of the April Employment Situation Report. After the weak ADP Employment Change released on Wednesday (+156K vs. Briefing.com consensus of +196K), today's initial jobless claims data may carry some more weight than usual as investors will look for corroboration that the job market has seen any meaningful weakening. Gold is up 0.55% to $1,281.4/troy oz.
  • Yield Check:
    • 2-yr: +1 bp to 0.75%
    • 5-yr: +2 bps to 1.25%
    • 10-yr: +2 bps to 1.79%
    • 30-yr: +2 bps to 2.65%
  • International News:
    • China's Caixin services PMI unexpectedly fell to 51.8 in April from 52.2 in March
    • The U.K.'s services PMI fell more than expected to 52.3 in April from 53.7 in March. April's reading was the lowest since February 2013 and was widely attributed to the upcoming referendum on membership in the European Union (set for June 23)
    • The European Central Bank issued its latest economic bulletin which said, in part, "that underlying inflation [in the eurozone] has not gathered upward momentum since last summer." The euro is down sharply against the U.S. dollar this morning (EUR/USD: -0.61% to 1.1419)
    • A wildfire around Fort McMurray, Canada's oil sands hub, is set to reduce Canadian oil production by several hundred thousand barrels/day and that has pushed WTI crude for June delivery as high as $45.32/bbl. The six-month high for the contract is $46.78
      • A power struggle between competing governments in Libya is also stoking supply fears. A tanker from a company that is supported by the eastern government was blocked from transporting oil by the Tripoli-based National Oil Corporation
    • The Turkish lira got hammered on Wednesday on the news that the prime minister will resign due to a recent conflict with President Erdogan. The president has been trying to consolidate his power by making constitutional changes in the direction of a presidential system and this has unnerved investors
      • USD/TRY: -0.81% to 2.931 (up from 2.80 on Tuesday morning) 
    • Layoffs by U.S. companies are at a seven-year high for 2016 YTD, with 250,061 workers being dismissed. Outplacement firm Challenger, Gray, & Christmas said that layoffs jumped 35% in March, with 20K of the 65K job cuts occurring in the energy sector
  • Data out Thursday:
    • April Challenger Job Cuts (07:30 ET)
    • Initial Jobless Claims for the week ending 4/30 and Continuing Jobless Claims for the week ending 4/23 (08:30 ET)
    • Natural Gas Inventories for the week ending 4/30 (10:30 ET)
  • Fed Speakers:
    • St. Louis Fed President Bullard (FOMC voter) (11:50 ET)
    • Dallas Fed President Kaplan (non-FOMC voter) panel on "International Monetary Policy and Reform in Practice (19:15 ET)

 
5/4/2016
3:20:46 ET
10-Year:+6/32 1.78    GNMAs:     EUR/USD:1.1496    USD/JPY:106.95   

Treasuries Rally as ADP Indicates Slowing Job Growth

  • U.S. Treasuries logged modest gains today as overnight selling in risky assets was reinforced during the U.S. session by a weaker-than-expected ADP Employment Change for April. Factory orders expanded more than expected in March and April ISM Services Index also beat forecasts but it was not enough to sap demand for safe haven assets. The U.S. Dollar Index ended up 0.28% to 93.20 -- the second day of relief after Tuesday's trade snapped a six-session slide. The S&P 500 now trades down 0.59% to 2,051.2. Thursday's session will be light on U.S. economic data ahead of Friday's release of the April Employment Situation Report
  • Yield Check:
    • 2-yr: -1 bp to 0.75%
    • 5-yr: -2 bps to 1.23%
    • 10-yr: -2 bps to 1.78%
    • 30-yr: -2 bps to 2.64%
  • News:
    • The ADP Employment Change for April came in at 156K, well short of both the Briefing.com consensus (196K) and the prior reading (194K, revised down from 200K)
    • U.S. productivity fell at a 1.0% annualized pace in the first quarter of 2016, better than the Briefing.com consensus of -1.4% and the Q4 2015 reading of -1.7% (revised up from -2.2%)
      • Unit labor costs grew 4.1% q/q, well ahead of the Briefing.com consensus for 2.6% growth. Unit labor costs rose 2.7% in Q4 2015, revised up from the initial reading of 3.3%
    • U.S. factory orders grew by 1.1% in March, fast than the Briefing.com consensus for growth of 0.5%. Orders fell 1.7% in February
      • Total inventories for all manufacturing industries increased 0.2%, which was the first increase after eight straight monthly decreases. The inventories-to-shipments ratio held steady at 1.37
    • The Institute of Supply Management's services index jumped to 55.7 in April from 54.5 in March. The Briefing.com consensus was 54.5
      • The improvement in the ISM Non-Manufacturing Index in April was fueled by an uptick in the New Orders Index to 59.9 from 56.7. In turn, the Employment Index rose to 53.0 from 50.3, marking the second straight month it has been above 50.0
    • The U.S. trade deficit narrowed to $40.4 bln in March from -$47.0 bln in February, a smaller deficit than the Briefing.com consensus of -$41.4 bln
  • Commodities:
    • WTI crude: +0.41% to $43.83/bbl.
      • The EIA reported that crude oil inventories rose 2.78 mln barrels in the week ending April 30 versus expectations for a build of 500-800K
    • Gold: -0.75% to $1,282.3/bbl.
    • Copper: -1.49% to $2.186/lb.
  • Currencies:
    • EUR/USD: -0.04 to 1.1494
    • USD/JPY: +0.25% to 106.95
  • Data out Thursday:
    • April Challenger Job Cuts (07:30 ET)
    • Initial Jobless Claimsfor the week ending 4/30 and Continuing Jobless Claims for the week ending 4/23(08:30 ET)
    • Natural Gas Inventories for the week ending 4/30 (10:30 ET)
  • Fed Speakers:
    • St.Louis Fed President Bullard (FOMC voter) (11:50 ET)
    • Dallas Fed PresidentKaplan (non-FOMC voter) panel on 'International Monetary Policy and Reform inPractice (19:15 ET)