08:21 am - European Yields: Yields across Europe hold little changed with slight outperformance in UK Gilts following the release of the latest Bank of England Monetary Policy Committee minutes and disappointing data. Meanwhile, yields across the Eurozone hold little changed following the larger than expected current account surplus (EUR25.9 bln actual v. EUR14.2 bln expected, EUR14.6 bln previous).
- UK Gilt yields are off 2 bps in the belly of the curve after the latest MPC minutes showed Governor Mervyn King and two constituents were outvoted in their effort to increase the BOE's asset purchase program by GBP25 bln. Today's disappointing data is driving action as retail sales (-1.3% MoM actual v. 0.0% MoM expected), public sector net borrowing (GBP8.0 bln actual v. GBP7.6 bln expected), and CBI Industrial Order Expectations (-20 actual v. -18 expected) all fell short of estimates. A 2 bp decline has the 10-yr Gilt yield down to 1.885%.
- German Bund yields are little changed following today's solid 10-yr auction. The auction raised EUR4.1 bln while drawing 1.41% and a 1.60x bid/cover. The 10-yr Bund yield is unchanged at 1.376%.
- A flat session in Spanish Bonos has the benchmark 10-yr yield holding at 4.195%.
- Light buying of Italian BTPs has yields off roughly 1 bp apiece. The small bid has pushed the 10-yr yield down to 3.885%.
07:29 am - Dollar Holds Steady: The Dollar Index has spent the entire overnight session in negative territory, and now holds small flat near 83.85. The greenback saw little reaction to a Bloomberg interview with NY Fed President Bill Dudley, in which he suggested it will take three to four months for the Fed to decide whether or not it will taper its QE program.
- EURUSD is +25 pips at 1.2930 as trade ticks higher for a third session. Action saw a muted response to the larger than expected Eurozone current account surplus (EUR25.9 bln actual v. EUR14.2 bln expected, EUR14.6 bln previous), but did tick to session highs near 1.2950 following the solid German 10-yr auction. The 1.3000 area will provide near-term resistance as both the 50- and 200-day moving averages aid the level.
- GBPUSD is -65 pips at 1.5085 as trade slides to a fresh one and a half month low after the latest Monetary Policy Committee minutes showed the Bank of England remains divided over whether or not more stimulus is needed. Governor Mervyn King and two other constituents were in favor of upping the asset purchase scheme by GBP25 bln, but were outvoted by the remaining members. The headlines crossed as today's data was rather weak with retail sales (-1.3% MoM actual v. 0.0% MoM expected), public sector net borrowing (GBP8.0 bln actual v. GBP7.6 bln expected), and CBI Industrial Order Expectations (-20 actual v. -18 expected) all falling short of estimates. Current levels should provide at least some near-term support while a breakdown sets up a test of the 1.4900 area, which represents the lowest since June 2010.
- USDCHF is +40 pips at .9745 as trade tests nine-month highs following comments from Swiss National Bank Chairman Thomas Jordan. Mr. Jordan, speaking in Frankfurt, suggested the central bank has not ruled out adjusting its EURCHF1.20 floor, and that negative interest rates are still a possibility. Meanwhile, EURCHF is +75 pips at 1.2595 as it trades at its best level in two years.
- USDJPY is +45 pips at 102.95 as trade pressures the best levels since October 2008. Today's bid comes after the Bank of Japan noted the 'economy has started to pick up.' Other comments suggested the central bank has been monitoring JGB yields carefully, and will act accordingly. The 10-yr JGB yield ticked above 90 bps on the news before slipping back to 89 bps. Meanwhile, data out overnight showed Japan's trade deficit narrowed to JPY0.76 trln (JPY0.63 trln expected, JPY0.92 trln previous).
- AUDUSD is -50 pips at .9750 as trade slips back onto the recent lows following the disappointing Westpac Consumer Sentiment (-7.0%). The .9600/.9700 area remains key as action holds near its worst level in a year. USDCNY fell to 6.1313.
- USDCAD is +40 pips at 1.0310 as trade looks to break above the trendline off the November 2011 high. Traders will be monitoring action closely upon the release of this morning's Canadian retail sales data.
06:54 am - Treasuries Tick Higher in Early Trade: Treasuries hold little changed following an uneventful overnight session that saw action hug the flat line. Headlines crossing early this morning come from a Bloomberg interview of NY Fed President Bill Dudley, in which he suggested the decision to taper the Fed's QE program will take three to four months. Maturities across most of the complex are up just a couple of ticks as they look to put together a second day of advances. The early bid has longer dated yields off close to 2 bps with the 10-yr pushing lower by 2 bps to 1.923% after yesterday's selling had it within an eyelash of 2.000%. Curve flattening persists with the 2-10-yr spread narrowing to 168.5 bps. Elsewhere, precious metals are firm with gold up $9 at $1386 and silver higher by $0.15 near $22.60. Today will see the weekly MBA Mortgage Index (7), existing home sales (10), and the FOMC minutes (14) cross the wires. Fed Chairman Ben Bernanke will discuss the economy in front of the congressional Joint Economic Committee (10).