The Week in Review/Week Ahead
Updated: 2014-03-03, 08:55:26 ET
Analyst: Jonathan Garber
The Week in Review
- Treasuries saw a mixed week as light selling took hold up front and a moderate bid developed at the long end.
- Economic data was mixed as Case-Shiller 20-city Index (13.4% actual v. 13.6% expected), consumer confidence (78.1 actual v. 80.8 expected), GDP - Second Estimate (2.4% actual v. 2.6% expected), and pending home sales (0.1% actual v. 0.8% expected) missed while Chicago PMI (59.8 actual v. 56.0 expected), durable orders (-1.0% actual v. -1.1% expected), Michigan Sentiment - Final (81.6 actual v. 81.5 expected), and new home sales (468K actual v. 400K expected) beat.
- This week's auctions were strong.
- Tuesday's solid $32 bln 2y note auction drew 0.340% and a strong 3.60x bid/cover. A strong indirect takedown (34.3%) helped offset the slightly disappointing direct bid (19.2%).
- Wednesday's $35 bln 5y note auction drew 1.530% and a strong 2.98x bid/cover (12-auction average 2.62x). A 50.6% indirect bid helped offset the light 9.1% direct takedown.
- Thursday's $29 bln 7y note auction drew 2.105% and solid 2.72x bid/cover as a strong direct takedown (24.6%) provided support to the in-line indirect bid (41.1%). Primary dealers ended up with just 34.3% of the supply.
- Fed Chair Janet Yellen took her semi-annual testimony to the Senate and suggested it is still too early to determine how much of an impact the winter weather is having on the data.
- This week's bid pushed longer dated yields down to their lowest levels in three weeks.
- The 30y shed -10bps over the course of the week, ending @ 3.592%. Traders will be watching support in the 3.550%/3.600% area over the coming days with a breaking dropping action to levels last seen in July.
- This week's action in the 10y (-7bps @ 2.658%) dropped the benchmark yield to its own three-week low. Action has probed the 200 dma in recent days, but remains in search of its first close below the mark since the beginning of May, when the Fed first began talk of trimming its QE program.
- The 5y ended the week little changed @ 1.511%. Action throughout the month of February has been confined to a tight 10bp range between 1.450%/1.550%.
- Up front, the 2y edged up +1bp to 0.325%. Most of the action during February took place between 0.300%/0.340%.
- A flatter curve took hold as the 2-10-yr spread narrowed to 233.5bps.
- Monday's data is heavy as personal income, personal spending, PCE Prices - Core (8:30), ISM Index, construction spending (10), and auto/truck sales (14) are due out.
- There is no data on Tuesday. The Senate Banking Committee will hold hearings on the nominations of Stanley Fischer, Jerome Powell, and Lael Brainard to the Fed's Board of Governors (10). Richmond's Lacker will give an "Update From the Fed" (16:15).
- Data picks back up on Wednesday with the release of the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), ISM Services (10), and the Fed's Beige Book (14). Dallas' Fisher will take place in a discussion in Mexico City (19:00) and SF's Williams will speak on the purpose of the Federal Reserve (20:30).
- Thursday will see Challenger Job Cuts (7:30), initial and continuing claims, productivity-rev., unit labor costs-rev. (8:30), and factory orders (10). New York's Dudley takes part in a discussion with Dow Jones and the Wall Street Journal (8:15) before Philly's Plosser speaks in London on "Perspectives on the Economy and Monetary Policy" (13) and ATL's Lockhart gives his economic outlook (18).
- Friday's data is the most anticipated of the week as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, trade balance (8:30), and consumer credit (15) are released. New York's Dudley discusses local economic conditions (12 noon).