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Update: 2015-03-03 11:55:21 ET

Moving the Market

- February Auto and Truck Sales (released throughout the day)

- Fed Chair Yellen speaks at an awards dinner (event begins at 20:00 ET)


3/3/2015
11:23:24 ET
10-Year:-01/32 2.096%    GNMAs:     EUR/USD:1.1190    USD/JPY:119.53   
RBA Surprises Markets: The Dollar Index continues to bounce around in the low end of 95. This has basically been the pattern since the DXY initially moved above 95 on January 23. The tight consolidation range represents a battle between the dollar bulls who see a strong U.S. economy and tightening Fed driving the greenback higher and dollar 'bears' who are doing some profit taking and are also concerned that the strong dollar will double up as a potential recovery headwind. 
  • The euro slipped back to test 1.1154 in early trade but has bounce back to test 1.12 for resistance. Economic data in the region remains surprisingly strong given that we are on the cusp of the ECB QE program. German Retail Sales and Spanish Unemployment numbers both handily beat expectations. The market focus remains on the ECB meeting on Thursday with hopes that Mario Draghi will provide more insight into the bonds they plan to purchase as well as funding for Greece. 
  • The pound has erased early selling pressure and is moving back to test 1.54. A better than expected Construction PMI number has helped provide support for sterling. Bank of England Governor Carney spoke earlier today but he was addressing the forex market manipulation probe and did not provide color on monetary policy. 
  • The yen has been able to hold 120 support as it continues to trade in its $118-120 area. The country ran a 10-year bond auction that saw its yield increase 9 bps to 0.40% from the prior auction. Demand was steady at 2.8x compared to 2.7x in prior auction.
  • In Australia, the Reserve Bank of Australia caught markets by surprise when it left rates unchanged at 2.25%. Most economists were expecting the country to cut 25 bps. The Aussie dollar rallied approx 60 pips in reaction and has moved back to the 0.7830 area against the greenback. Key comments from the RBA include: 
    • "The Australian dollar has declined noticeably against a rising US dollar, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy".
    •  "At today's meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings".

 
3/3/2015
11:15:21 ET
10-Year:-2/32 2.09%    GNMAs:     EUR/USD:1.1194    USD/JPY:119.52   
Treasuries Fall Back to Red: 
  • After a strong mid-morning rally, treasuries have fallen back into a range
  • Equities have been persistently testing lows this morning, and that has put a bid into the Treasury market
  • The 5-yr is the worst performer on the day, with its yield rising 2 bps to 1.60%
  • Yield check:
    • 2-yr: unch at 0.67%
    • 5-yr: +1 bp to 1.59%
    • 10-yr: +1 bp to 2.09%
    • 30-yr: unch at 2.68%

 
3/3/2015
9:51:26 ET
10-Year:unch 2.08    GNMAs:     EUR/USD:1.1190    USD/JPY:119.56   
Treasuries Rebound:
  • Treasury prices have risen over the past hour as equities had a lackluster open and the S&P 500 continues to test its 200-hour moving average. 
  • The U.S. Dollar Index weakened as well, down 16 ticks (-0.17%) to 95.30
  • The curve remains steeper on the day, with the 2-year actually up on the day
  • Yield check:
    • 2-yr: -1 bp to 0.66%
    • 5-yr: unch at 1.58%
    • 10-yr: unch at 2.08%
    • 30-yr: unch at 2.68%


 
3/3/2015
8:55:51 ET
10-Year:-5/32 2.10    GNMAs:     EUR/USD:1.1172    USD/JPY:119.76   
Treasuries Hold Lows:
  • We are holding above the lows of the session in all maturities, due partly to some pre-open equity selling. S&P 500 futures are down 6 points from yesterday's close to 2108
  • The U.S. Dollar Index has been strengthening in a very choppy trade ever since Fed Chair Yellen's testimony before the Senate Banking Committee
    • Some currency market observers believe that her testimony was dovish and will undermine the Dollar's rally
    • Skepticism is healthy for bull markets
  • The curve is steeper today, with 2's/10's out to 144 bps and 5's/30's out to 111 bps
  • Yield check:
    • 2-yr: unch at 0.66%
    • 5-yr: +1 bp to 1.59%
    • 10-yr: +2 bps to 2.10%
    • 30-yr: +2 bps to 2.70%

 
3/3/2015
8:03:13 ET
10-Year:-5/32 2.10    GNMAs:     EUR/USD:1.1167    USD/JPY:119.76   
Gilts Sell Off:
  • U.K. Gilts sold off in a curve-steepening trade after the United Kingdom's February Construction PMI beat expectations at 60.1, versus 59.1 in January
  • Spanish unemployment fell more than expected, -13.5K versus a prior reading of 78K 
  • German retail sales for January exceeded expectations, rising 2.9% m/m versus 0.6% in December
  • There seemed to be no dominant core vs. periphery theme in Eurozone debt. The periphery has had a very strong run since February 11th, and the market is digesting that move
    • France, 10-yr OAT: +1 bp to 0.66%
    • Germany, 10-yr Bund: +1 bp to 0.32%
    • Greece, 10-yr note: -12 bps to 9.29%
    • Ireland, 10-yr note: +1 bp to 0.89%
    • Italy, 10-yr note: +1 bp to 1.36%
    • Portugal, 10-yr note: +3 bps to 1.88%
    • Spain, 10-yr Bono: +1 bp to 1.29%
    • U.K., 10-yr Gilt: +5 bps to 1.86%


 
3/3/2015
7:47:38 ET
10-Year:-5/32 2.10    GNMAs:     EUR/USD:1.1162    USD/JPY:119.84   
Technical Developments Overnight:
  • The 5-yr note yield broke through its 200-day moving average at 1.593%
  • The 10-yr yield broke through its last downtrend from the September 18th high at 2.08%. All downtrends that are still standing would be drawn from December 31st of 2013, and wouldn't come into play until about 2.20%
  • The 30-yr yield broke through its resistance at 2.683% and there don't seem to be any obvious resistance levels in sight
  • As noted yesterday, all 3 of these yields found support at their 21-day moving averages last Thursday
  • On the other hand, short-term sentiment seems to have gotten bad, if Twitter is at all representative of the market
  • Yield check:
    • 2-yr: unch at 0.66%
    • 5-yr: +2 bps to 1.60%
    • 10-yr: +2 bps to 2.10%
    • 30-yr: +2 bps to 2.70%

 
3/3/2015
7:19:47 ET
10-Year:-4/32 2.10    GNMAs:     EUR/USD:1.1165    USD/JPY:119.83   
Continued Treasury Selling in Early Morning:
  • The sellers from yesterday found some follow-through this morning, although the 2-yr note is now holding above yesterday's lows. The bears are growling loudly, believing that they have caught the turn that has been so anticipated since the beginning of quantitative easing and the recovery in the U.S. economy
  • Yield Check:
    • 2-yr: unch at 0.66%
    • 5-yr: +2 bps to 1.59%
    • 10-yr: +2 bps to 2.10%
    • 30-yr: +1 bp to 2.70%
  • International News:
    • In the U.K., the February Construction PMI beat expectations at 60.1, versus 59.1 in January. Gilts sold off following the report
    • Spanish unemployment dropped unexpectedly, falling by 13.5K versus a previous reading of +78K
    • German retail sales beat expectations rising 2.9% m/m in January, versus 0.6% for December
    • The Reserve Bank of Australia disappointed markets by holding its main policy rate at 2.25%. Expectations had grown for a cut in the lead-up to the meeting
    • Chinese shares sold off sharply, led by the banking sector, despite the interest rate cut by the PBoC over the weekend. The Shanghai Composite was down 2.2%
    • Greece appears to be negotiating a third bailout of 30 to 50 billion Euro, according to multiple sources
    • European yields:
      • France, 10-yr OAT: +1 bp to 0.65%
      • Germany, 10-yr Bund: unch at 0.32%
      • Greece, 10-yr note: -11 bps to 9.3%
      • Italy, 10-yr note: unch at 1.35%
      • Spain, 10-yr Bono: +1 bp at 1.28%
      • U.K., 10-yr Gilt: +4 bps to 1.86%
  • Data Out Today:
    • February Auto Sales (14:00 ET)
    • February Truck Sales (14:00 ET)
  • Fed Speak:
    • Fed Chair Yellen speaks at awards dinner (Event begins at 20:00 ET)

 
3/2/2015
3:19:23 ET
10-Year:-25/32 2.08    GNMAs:     EUR/USD:1.1185    USD/JPY:120.14   
U.S. Governments End Deep in Red:
  • A particularly vicious wave of selling hit the U.S. Treasury market between 9:30 and 11:30 ET. The selling was focused in the 10-yr note and 30-yr bond, but 2's and 5's took significant losses as well. Rallies were minimal to nonexistent, as the market afforded short-sellers few entry points and little relief to longs
    • 2's/10's rose 5 bps to 143 bps
    • 5's/30's rose 1 bp to 111 bps
  • Yield Check:
    • 2-yr: +3 bps to 0.65%
    • 5-yr: +7 bps to 1.57%
    • 10-yr: +8 bps to 2.08%
    • 30-yr: +8 bps to 2.68%
  • The U.S. economic data released today was, on balance, weaker than expected
    • Spain's economic minister said a 3rd Greek bailout is being negotiated, and might be for 30-50 billion Euro, according to CNBC and Bloomberg News
    • Economic data:
      • February ISM: Actual 52.9, Briefing.com consensus 53.0, January ISM 53.5
        • Every regional manufacturing survey declined and the index hit its lowest level in 13 months. The silver lining was that "the contraction in backlogs (51.5 from 46.0) should help production in the near future", according to Briefing.com chief economist, Jeffrey Rosen
      • January Personal Income: Actual 0.3%, Briefing.com consensus 0.4%, prior 0.3%
        • The lack of demand is surprising given the increase in income and declines in prices. The personal savings rate increased to 5.5% in January from 5.0% in December
      • PCE prices fell 0.5% and core PCE prices, which exclude food and energy, rose just 0.1%
      • January Personal Spending: Actual -0.2% (Briefing.com consensus -0.1%, prior -0.3%)
      • January Construction Spending: Actual -1.1%, Briefing.com consensus 0.2%, prior 0.8% revised from 0.4%
        • The entire decline in private construction came from the non-residential sector
  • Equities: 
    • The S&P 500 rose 9.82 points (+0.47%) to 2114.32, within 6 points of a fresh all-time high
  • Commodities:
    • WTI Crude fell 5 cents or 0.10% to $49.71/bbl after trading as high as $51.04/bbl
    • Copper remained unchanged at $2.70/lb.
    • Gold for April delivery fell $7.20 or 0.59% to $1205.90/troy oz., after trading as high as $1223.00/troy oz.
  • Currencies:
    • EUR/USD: -12 pips (-0.11%) to $1.1185
    • USD/JPY: +51 pips (+0.43%) to 120.14
  • On Deck for Tomorrow:
    • Data
      • February Auto Sales (14:00 ET)
      • February Truck Sales (14:00 ET)
    • Fed Speak:
      • Fed Chair Yellen speaks at award dinner (event begins at 20:00 ET)