3:42 pm - Where Now ? Treasuries saw a nice pop higher, after swinging pretty wide in the past week, getting assorted help from sliding stocks, refunding relief, screaming crude prices and renewed credit related worries.  Trade survived a good chunk of supply through the week, with the 10-and-30-yr auctions going fairly well, while weight from early corp issuance was unwound into the later part of the week.  Mortgage players were popping in to play through the options, directionally mixed, but leaning slightly bond bullish.  The week ahead has a whole lot more for the market to play with, including some higher-status reports.  Data due are generally expected to run flat to worse so it'll be back to the battle of "how bad is bad?" for bonds again. The good news is that inflation measures are expected to hold in Earnings are winding down with retailers coming in next week along with a batch of lesser names ("scrubs") due, so the bad news spigot may slow.. The curve trade took a breather, after steepening steeply throughout the week, getting range bound and quiet Fri, with the 2-10-yr yield spread heading out about 153, slightly flatter on the day.  The buck actually lost ground on the week despite knocking the euro down to mid-Mar lows of 1.5280 yesterday as the action since ECB's do-nothing meeting has been steady euro buying. The yen has broken its 3-week losing streak with Wed's rejection of the buck at 105.70. Spot gold is up at 887.03 (+5.18) while crude settled at 125.96 (+1.84). Fed-speak factors in largely next week with Tues featuring about 8 appearances and Bernanke taking the spotlight. Retail sales (Tues) and CPI (Wed) take top billing with middling data hitting through the week.

3:15 pm - Still Offered : The dollar is under pressure in thinning trade as the euro and yen  edge their way toward overnight highs. The strategy to sell dollars is creeping back into trade, favoring a larger short-term correction, longer term there remains much speculation on the euro's underpinnings. The yen, meanwhile is taking a bite out of trade as risk aversion fuels the anti-carry movement. The dollar sees support nearby at 102.60 and below at 101.90. The euro is chopping its way through offers at 1.5480 targeting offers near 1.5565. Dips are getting bought on approaches of 1.5450. The pound is bouncing modestly off a test of 1.9450 as its downward trend off mid-Mar highs is easing somewhat. Offers at 1.9550 provide short-term resistance and above at 1.9650. The week ahead will bring better data to gauge sentiment on the buck. A bunch Fed-speak is expected with Bernanke headlining on Tues. The dollar index is holding just above 73 while crude oil settled at 125.96 (+1.84) and spot gold tipped up to 886.32 (+4.47).

2:54 pm - Almost Over :  Trade has been skittering along in sluggish, late Fri trade, clinging to gains as stocks work back toward the low end of the range.  Looking out to the week ahead there will be a lot more events on tap for the market to play with, with a fairly full calendar (with some quality data, even) and Fed-speak all over the place.  With supply out of the way the market will be working hard to find some follow-through, after an iffy week looks to go out with decent gains.   

2:13 pm - Ticking Off : The market is marking time into the late part of the session as size has deteriorated add prices slipping even as stocks continue to struggle. The long end is leading the way off as profit-taking filters through the thin trade. Mortgage players have been popping up in some options trades again today with the slant back to more bullish and furter out the calendar. The curve remains trapped in a fairly tight range, hovering around unch as the 2-10-yr yield spread 155

2:06 pm - Weekly Corporate Summary : Corporations tapped the market for $39B this week compared to $34.4B last week and $45.6B prior to that. The 08 average has been boosted to $20B owing to the past month's worth of huge supply. AT&T and GlaxoSmithKline led the pack for the week. The spread on investment grade paper narrowed 5 basis points to 252 bps while junk went out 19 bps to 683 bps. (Bloomberg).

1:25 pm - New Issue : Morgan Stanley will sell $4B in 2 parts with the 2-yr notes at an expected +210 basis points and 7-yrs at +287.5 bps.

12:52 pm - AIG Agony :  More from Gaffen..."Beware of companies that find new ways to value assets while they're sinking...Where have we heard this story before? A company loses a bundle of money due to depressed values for its assets, and it says those valuations don't really count...During the conference call, Steven Bensinger...noted that the $19.3 billion unrealized loss estimate in one of its pools of [CDOs] doesn't jibe with their analysis, which should suggest a loss of $1.2 billion to $2.4 billion...Naturally, the estimate to be ignored is the one based on accounting principles, as the company says that 'during the first quarter of 2008 AIG developed a new methodology to estimate more precisely its potential realized losses from this portfolio.' Naturally, this new methodology 'lowers' the 'potential realized losses.'For financial institutions, it seems lower housing valuations (as determined by a market) are enough to alter lines of credit, raise certain interest rates or change insurance and loan terms. But market-based analyses of their own portfolios? Obviously hogwash. "

12:40 pm - Where Will Crude Be Mid-Oct : The run-up in crude has been pretty freaking spectacular, and shows no signs of slowing. So once the US driving season (aka summer) ends, where will crude be trading?  Will it have reverted to a less meaner mean?  Or will it see the $150 to $200 that has been bandied about? WSJ's Gaffen today notes in "Oil at a Ridiculous $125 ... And the worst part? It may not even be a bubble. At least, that's how economists surveyed [by WSJ] put it. Still, the survey shows that that the 53 respondents, on average, still expect the price of crude to fall to about $105 by the end of next month and to about $93 by the end of the year."  Email thoughts on the what's and why's, and most importantly, where crude will be trading in 6-mos for a chance to win some Briefing.com swag. Email BondSquad@Briefing.com

12:26 pm - Down Boy : Trade has been boosted as stocks stumble like a 3-legged dog and oil continues to bubble to record highs.  The bonds have been seeing renewed buying interest out of funds as the market recovers from the prolonged sell-off.  Added buying interest is coming in now that refunding is over while new cash has been working its way back into the safety securities.  The market is being held in check however, as commodity prices continue to soar, heating up inflation concerns but the dominance of crude and its reputation as a tax on consumers wins that conversation.  Run-ups in global bonds are assisting as well as they gained on tottering stock markets.  There is little to throw a wrench in the day's rally, but action remains thin, and as the day drag on will thin further, taking some of the legs out of the run.  The curve has been dancing in a fairly tight range, relatively speaking, but is holding near the steepest levels since mid-Apr with unwinds doing little damage as players take their Barbies and go home. The 2-10-yr yield spread is running at 153.5. Mar's trade balance improved but the buck saw only a fleeting uptick. It remains offered and trade is beginning to fade its rallies again. Spot gold has flipped lower to 877.81 (-4.04) while crude pared gains to 124.85 (+1.15).

 

11:31 am - Its Just Crude :  The bonds are working back some, with the long end doing the heavy lifting for the moment in slowing action.  The market will continue to be somewhat of a puppet to what the stocks pull, but there remains fundamental support (all the bad news, barreling crude prices dragging on growth, new cash looking for safer places to land, less supply in the pipeline, reported fund buying) while players say the overnight and early buyers will be behind any sell-offs (mild).  Resurgent credit concerns are also working in the bonds favor, but as the day drags on and traders back away, things will get choppy and any downside will be exaggerated. 

11:12 am - Holding Gains, Barely : The market is grasping around trying to hold onto positive ground as stocks attempt to recover off their early session lows. Trade has been on the light side and the data were largely dismissed, leaving prices vulnerable to technical levels and equity swings, both of which are weighing into midday. The dollar is trying to correct all of its overnight losses but its latest boost looks mostly position squaring into the London close.

10:40 am - Cash to System : Fed adds $3.5B via weekend repos.

10:32 am - Snagged on Little Orange Line : The continuous 10-yr futures contract elbowed its way up to the daily up trend line (orange) that is now resistance near 116-16 but has since backed off. Bids are under pressure near 116 with help below at 115-21 and 115-13. Above see brighter skies ahead with resistance at 117-07.

10:30 am - Stalled : Trade has been waddling along in a fairly tight range struggling with those last 5lbs of stock trade spillover where an attempt at a comeback is weighing.  Nothing much on the horizon to alter the course but further news on financials would give, if nothing else, a slight pop.  The curve has reverted to near unchanged with the 2-10-yr yield spread running at 155.3 in light trade. 

10:12 am - Sluggish:  The market is getting added drag as the "news" on financial shop problems is digested and trade takes on a "What? Me worry over a measly $400B?" attitude and pulls out of quality issues.  Bonds are also feeling a little pain in general squaring as well as getting a little drag from a twist back off in global bonds.  There is nothing on tap to add much to trade, so gyrations in stocks will reverberate in the market as it slumps into late-Fri slowing action.

10:01 am - Dollar Dragged Lower : The buck is losing a slow battle as trade continues along several paths, none of which are benefiting the dollar bulls right now. The less-hawkish expectations via ECB are being priced-out gradually, despite weaker growth expectations giving the euro a bit of nudge higher. Also, risk aversion on soaring oil and slumping stocks fuels a carry unwind propping the yen across the board. The buck will need to make a stand soon in order to curtail waning sentiment as the burden of proof for further gains is shifting slowly back into the hands of the bulls.  The yen is chopping its way higher on a session-by-session basis knocking the buck down to 102.60, offers at 103.20 and 103.40 are seen as short-tem caps. The euro failed a test of 1.55 but still retains a bid on dips to 1.5430 with added support at 1.5390. The pound slipped through support at 1.95 and is now trying to plug the leaks near 1.9450 while offers at 1.9550 limit  any rebound.  The dollar index is holding above 73. Crude oil is way up at 125.52 (+1.83) after poking above 126 briefly and spot gold is up at 884.57 (+2.72).

 

09:38 am - Longs Leading : Trade was suffering some mild blowback, moving lower as pre-weekend squaring filtered through, but the bias remains to the buy side.  The market will be (sigh, once again) a slave to what the guys over in the stock world decide to do, which is unfortunate.  The day's complete lack of data is a negative, while the weekend safe-haven buying will aid in support.  Another issue is supply, which is less of a big deal now that the refunding is over, giving a slight edge to bond bulls. 

08:58 am - New Issue : Petrohawk Energy sold $500M of 7-yr notes at +455 basis points.

08:37 am - Finding Room to Grow : The market is grabbing a little more ground to the upside as risk aversion creeps back into trade. AIG got the ball rolling late yesterday with an amazingly awful earnings report which infected global equities and the whole rate-hike by the end of 08 crowd who have been increasingly vocal. But bad financial earnings have been long anticipated and equities have shown a formidable ability to lock such things in the trunk of their cars, so gains in treasuries could evaporate quickly. Oil continues its thrust into deep space helping fuel the flight to quality. The 2-10-yr yield spread is holding steeper at 155.2 with the short end bid. The 2-yr yield is trying to break its upward bias but it will likely take a push below Fed Funds at 2% to really alter risk sentiment. Bond prices in the EuroZone and Japan were given a ride higher by the flight to quality. Treasuries have little to work with today. Technically, the market still has a ways to go to reverse the medium term correction but it has slowed the downward price pull. A press back below 3.500% on the 10-yr yield should do the trick but data next week will need to conform to the worst expectations to pull that off. The dollar continues to lose ground as the push/pull spiral of spiking oil blends better with a declining buck, despite the recovery-ist's best intentions. Spot gold is up a bit at 886.05 (+4.20) while crude is off somewhere in hyper-space at 125.07 (+1.38). The trade balance hits early (8:30).