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Update: 2014-10-23 15:55:44 ET

Moving the Market

Initial Claims: Actual 283K, consensus 285K, prior 264K (revised 266K)

Continuing Claims: Actual 2351K, consensus 2380K, prior 2389K

FHFA Housing Price Index: Actual 0.5%, prior 0.1%

Leading Indicators: Actual 0.8%, consensus 0.5%, prior 0.2% (revised 0.0%)


10/23/2014
3:30:56 ET
10-Year:-17/32 2.277    GNMAs:     EUR/USD:1.2653    USD/JPY:108.11   
Yields Climb to Two-Week Highs:
  • Treasuries booked modest losses as stronger than expected economic data from around the globe pushed money into riskier assets. 
  • The complex had a flat to weaker bias ahead of the cash open and continued lower into afternoon trade as U.S. economic data outpaced estimates.
  • Initial claims (283K actual v. 285K expected), continuing (2351K actual v. 2380K expected) claims, and leading indicators (0.8% actual v. 0.5% expected) all posted better than expected results.
  • Today's $7 bln 30Y TIPs auction drew 0.985% and a 2.29x bid/cover, and marked session lows as selling caused yields to rub up against key resistance levels
  • Headlines of the first possible Ebola case in New York City dropped yields off their highs shortly before the cash close.
  • Up front, the 2Y edged up +2.9bps to 0.399%. Traders continue to watch resistance in the 0.400% area. 
  • In the belly, the 5Y rallied +5.3bps to 1.494%. Resistance in the 1.500%/1.550% region will be under the microscope in the days ahead. 
  • The 10Y climbed +4.6bps to 2.275%. Action tested, but could not break out above 2.300% resistance. 
  • Selling at the long end ran the 30Y up +4.6bps to 3.046%. Resistance in the 3.050% area remains in focus. 
  • A steeper curve developed amid today's selling with the 2-10-yr spread widening to 187.5bps.
  • Precious metals lost ground as gold fell -$14 to $1231 and silver slid -$0.04 to $17.19. 
  • Data: New home sales (10).

 
10/23/2014
2:25:33 ET
10-Year:-19/32 2.289    GNMAs:     EUR/USD:1.2641    USD/JPY:108.30   
Dollar Nears 86.00 as Data Remains Strong:
  • The Dollar Index holds small gains as trade tests session highs near 85.90.
  • Traders continue to watch the 86.00 level as a breakout would put the nearly four and a half-year highs from early-October in the crosshairs. 
  • EURUSD is +5 pips @ 1.2650 as trade has given up its early gains. The single currency climbed to a high of 1.2675 following this morning's mostly better than expected PMI data from the region. However, the gains would not hold as strong U.S. economic data and skittishness over the upcoming weekend stress tests of EU banks wiped away those gains. The 1.2600 area remains firmly in focus. GfK German Consumer Climate will cross the wires tomorrow.
  • GBPUSD is -10 pips @ 1.6030 as sellers fight to remain in control for a third day. A trio of disappointing data in the form of retail sales, BBA Mortgage Approvals, and CBI Industrial Order Expectations led to early action probing 1.6000 support, but buyers managed to defend the level and prevent a retest of the 11-month lows near 1.5900. Britain's Preliminary GDP will be released tomorrow
  • USDCHF is flat @ .9540 as trade continues to flirt with resistance at the level. Action remains closely tied to the euro. 
  • USDJPY is +105 pips @ 108.25 as trade zooms to a two-week high in the midst of the current six-day winning streak. The return to risk has fueled the rally that has action nearing a test of 108.50 resistance. A retest of six-year highs at 110.00 cannot be ruled out.
  • AUDUSD is flat @ .8760 as trade presses its worst levels of the day. The hard currency drifted little changed into U.S. trade before climbing to its best levels of the day in response to strong Caterpillar earnings. However, buyers exhausted and trade has drifted lower over the remainder of the day. Bulls cannot be comfortable as a break out of the .8650/.8850 range appears imminent. 
  • USDCAD is -5 pips @ 1.1235 as an uneventful session draws to a close. The pair has been virtually ignored in today's trade as investigators continue to piece together the details of yesterday's shooting at Canada's Parliament.

 
10/23/2014
1:05:49 ET
10-Year:-22/32 2.293    GNMAs:     EUR/USD:1.2644    USD/JPY:108.25   
Auction Up: $7 bln 30Y TIPs auction draws 0.985%, 2.29x bid/cover, 64.5% indirect bidders, 4.5% direct bidders

Treasuries are slipping to fresh lows following the auction. 
 
10/23/2014
11:51:56 ET
10-Year:-16/32 2.276    GNMAs:     EUR/USD:1.2655    USD/JPY:108.13   
Yields Test Resistance:
  • Treasuries linger near session lows as better than expected economic data has fueled a flight out of safety and into risk. 
  • Today's weakness has yields across the curve rubbing up against key resistance levels
  • Up front, the 2Y is higher by +2.4bps and is testing resistance in the 0.400% area.
  • In the belly, the 5Y is firmer by +5.7bps as action moves towards a test of 1.500%/1.550% resistance. 
  • A +5bps advance has the 10Y a couple bps away from 2.300% resistance. 
  • Selling at the long end has the 30Y +4.2bps and testing resistance in the 3.050% region. 
  • A steeper curve persists as the 2-10-yr spread trades 188.5bps. 
  • Precious metals are mixed with gold -$17 @ $1229 and silver flat @ 17.22.

 
10/23/2014
11:34:08 ET
10-Year:-15/32 2.273%    GNMAs:     EUR/USD:1.2644    USD/JPY:108.09   
Yen Slides to Two Week Lows: The Dollar Index rallied to 85.94 but fell short of a test of 86.00 The greenback has pulled back to the 85.80 area where it is attempting to stabilize for another test. It was generally a positive day on the economic front as initial claims, FHFA housing prices, and leading indicators all outpaced expectations. But the forward looking Markit Manufacturing number was a notable under performer. 
  • The euro was able to stem the downward direction for the week as Germany's preliminary PMI data was better than expected. France missed expectations, but the jump by Germany back into positive territory garnered the markets attention. The euro has started to give up some of its earlier gains as the dollar has proven stronger at this juncture. 
  • The pound has dipped back to test the 1.6000 level for support. A weak retail sales number has led to the weakness in cable. 
  • The yen has tumbled back to 108.00 as risk on finds its way back into the market. Global PMIs have helped provide some of the boost with Japan, China, and Germany beating expectations. There is still caution in the markets as the headline numbers proved to be better than some of the underlying details. But for the moment risk is back and helping push the yen to its lowest level in two weeks.

 
10/23/2014
10:06:59 ET
10-Year:-12/32 2.261    GNMAs:     EUR/USD:1.2640    USD/JPY:108.08   
Data Reaction II:
  • Treasuries continue to press their worst levels of the session following the strong leading indicators (0.8% actual v. 0.5% expected) data. 
  • Early selling has yields across the curve higher by +3/+4bps. 
  • Up front, the 2Y holds +2bps @ 0.390%. The yield is threatening 0.400% resistance. 
  • Selling continues to have the biggest impact on the belly with the 5Y +4bps and nearing a test of the 1.500% level. 
  • The 10Y continues its ascent with action now +3.2bps @ 2.261%. 
  • A +3bp advance has the 30Y at 3.030% and closing in on the 3.050% resistance level. 
  • A steeper curve persists with the 2-10-yr spread wider @ 187bps. 
  • Precious metals remain in the red with gold -$12 @ $1235 and silver -$0.05 @ $17.18.

 
10/23/2014
8:35:48 ET
10-Year:-09/32 2.252    GNMAs:     EUR/USD:1.2661    USD/JPY:107.74   
Data Reaction:
  • Treasuries are probing session lows following the better than expected initial (283K actual v. 285K expected) and continuing (2351K actual v. 2380K expected) claims data
  • Selling continues to have the biggest impact on the belly of the curve as the 5Y holds +3.1bps @ 1.472%. 
  • A +2.3bp advance has run the 10Y back above the 2.250% mark.
  • Light selling at the long end has the 30Y +1.7bps @ 3.017%. 
  • Selling has swung the curve steeper with the 2-10-yr spread wider @ 186.5bps. 
  • Precious metals remain in the red with gold -$11 @ $135 and silver -$0.09 @ $17.14. 
  • FHFA Home Prince Index will cross the wires at 9am ET.

 
10/23/2014
8:02:48 ET
10-Year:-07/32 2.243    GNMAs:     EUR/USD:1.2666    USD/JPY:107.63   
European Yields
  • Yields are firm across Europe.
  • Eurozone Flash Manufacturing (50.7 actual v. 50.0 expected, 50.3 previous) and Services (52.4 actual v. 52.0 expected, 52.4 previous) PMI both topped estimates. 
  • German Bunds are slipping in response to the mixed Flash Manufacturing (51.8 actual v. 49.6 expected, 49.9 previous) and Services (54.8 actual v. 55.0 expected, 55.7 previous) data. Notable was the Manufacturing number regaining expansion following last month's contraction. A +1bp advance has the 10Y +1bp @ 0.880%. 
  • UK Gilts hold small losses after retail sales (-0.3% actual v. -0.1% expected), BBA Mortgage Approvals (39.3K actual v. 41.5K expected), and CBI Industrial Order Expectations (-6 actual v. -3 expected, -4 previous) all missed estimates. Light selling has the 10Y +2bp @ 2.230%. 
  • French OATs drift little changed after both Flash Manufacturing (47.3 actual v. 48.6 expected, 48.8 previous) and Services (48.1 actual v. 48.2 expected, 48.4 previous) slid deeper into contraction. A +1bp advance has the 10Y @ 1.300%. 
  • Modest selling in the periphery has the Italian and Spanish 10Y both higher by +3bps @ 2.540% and 2.220%, respectively.

 
10/23/2014
7:15:27 ET
10-Year:-06/32 2.241    GNMAs:     EUR/USD:1.2664    USD/JPY:107.53   
PMI Data Boosts Euro:
  • The Dollar Index has surrendered its early gains and is now pressing session lows near 85.70. 
  • The Index tested resistance at the 86.00 level that guards the early-October highs, but sellers have so far managed to defend the key level. 
  • EURUSD is +25 pips @ 1.2670 as trade sits near session highs. The single currency has seen a boost from the mostly better than expected Flash Manufacturing and Services PMI data from the region. Key takeaways from the data are the weakness in France as both Manufacturing (47.3 actual v. 48.6 expected, 48.8 previous) and Services (48.1 actual v. 48.2 expected, 48.4 previous) slipped deeper into contraction and the strength in Germany as Manufacturing (51.8 actual v. 49.6 expected, 49.9 previous) regained the expansion line. Support in the 1.2600 area remains under close watch. 
  • GBPUSD is -30 pips @ 1.6010 as sellers remain in control for a third day following a trio of disappointing data. Retail sales (-0.3% actual v. -0.1% expected), BBA Mortgage Approvals (39.3K actual v. 41.5K expected), and CBI Industrial Order Expectations (-6 actual v. -3 expected, -4 previous) all fell short of estimates, and have sterling pushing lower for a third session. A breakdown of 1.6000 puts the 11-month lows near 1.5900 in the crosshairs. 
  • USDCHF is -15 pips @ .9525 as trade presses session lows after being rejected at .9550 resistance. A quiet day for news and data out of Switzerland means trade remains tightly correlated to the euro.
  • USDJPY is +25 pips @ 107.45 as action marches higher for a fifth straight session. The early bid has the pair at a one and a half-week high as the bulls set their sights on a test of resistance in the 108.50 area. 
  • AUDUSD is +20 pips @ .8780 amid a mostly lackluster trade. Early action has been confined to a 45 pip range as the in-line NAB Quarterly Business Confidence (6) reading has left traders looking for more. A break of the .8650/.8850 range should be coming shortly. USDCNY climbed 0.5% to 6.1458, its biggest one-day move since March
  • USDCAD is +5 pips @ 1.1245 as trade drifts little changed near its best levels since July 2009. Today's scheduled testimony by Bank of Canada Governor Stephen Poloz has been cancelled as officials are still piecing together yesterday's shooting at Canada's Parliament.

 
10/23/2014
6:45:32 ET
10-Year:-02/32 2.226    GNMAs:     EUR/USD:1.2672    USD/JPY:107.44   
Treasuries Trade Flat:
  • Treasuries trade little changed ahead of the cash open despite risk assets catching a bid in response to the mostly better than expected eurozone PMI data. 
  • Overnight trade continues to see wider than normal ranges, which expanded to as much as 7bps in the belly of the curve.
  • Up front, the 2Y is +0.8bps @ 0.378%. Action tested resistance in the 0.400% area, but has so far been unable to breakout. 
  • In the belly, the 5Y holds +0.9bps @ 1.450%. A test of meaningful resistance doesn't occur until the 1.550% level.
  • The 10Y trades flat @ 2.229%. The benchmark yield ended yesterday's session at a one-week high as action sets up for a test of resistance in the 2.300% area. 
  • A light bid at the long end has the 30Y -0.5bps @ 2.995%. Yesterday, the yield on the long bond posted its first 3.000% close in a week and a half.
  • A slightly flatter curve is in the works as the 2-10-yr spread trades 185bps. 
  • Precious metals are lower with gold -$6 @ $1239 and silver -$0.09 @ $17.14.
  • Data: Initial and continuing claims (8:30), FHFA Housing Price Index (9), and leading indicators (10).

 
10/22/2014
3:19:55 ET
10-Year:-05/32 2.232    GNMAs:     EUR/USD:1.2638    USD/JPY:107.21   
30Y Settles at 3.00%:
  • Treasuries booked small losses. 
  • The complex was bid into the cash open before pressing to its worst levels of the day in response to the mixed CPI (0.1% actual v. 0.0% expected) and Core CPI (0.1% actual v. 0.2% expected) data
  • Maturities trimmed those losses over the course of the afternoon as equity markets turned red, but were unable to reclaim their respective flat lines.
  • Up front, the 2Y edged up +2bps to 0.370%. Action tested resistance in the .400% area before pulling back. 
  • Selling had the biggest impact on the belly as the 5Y added +3.1bps to 1.441%. The 1.500%/1.550% area is home to some resistance. 
  • The 10Y climbed +2.1bps to 2.229%. The benchmark yield finished at a one-week high as action moves towards 2.300% resistance. 
  • The 30Y lagged, adding +1.6bps to 3.000%. Resistance in the 3.050% area is in focus. 
  • A steeper curve persisted as the 2-10-yr spread widened to 186bps.
  • Precious metals went off near the lows with gold -$8 @ $1244 and silver -$0.39 @ $17.16. 
  • Data: Initial and continuing claims (8:30), FHFA Housing Price Index (9), and leading indicators (10).