Bond Market Update from Briefing.com

11:45 am - Treasury Auction Preview

  • $35 billion 5-year note auction (results at 13:00 ET)
    • Prior auction
      • High yield: 1.39%
      • Bid-to-cover: 2.35
      • Indirect bid: 55.7%
      • Direct bid: 4.72%
    • Prior 12-auction averages
      • High yield: 1.595%
      • Bid-to-cover: 2.62
      • Indirect bid: 54.1%
      • Direct bid: 11.1%
      • 11:20 am - DXY at 7-week Lows Ahead of FOMC: The Dollar Index has extended its losses as we await the Fed meeting tomorrow. The DXY has slipped below its 50 sma and is now at its lowest level in seven weeks. A miss on Consumer Confidence was the latest economic data point to miss the mark. The weak data in April has many expecting the FOMC to strike a dovish tone in tomorrow's statement.

        • The euro is squeezing higher today as it moves above its 50 sma. It still has a strong resistance level at 1.10 sitting above. Also aiding the move has been improved commentary surrounding the Greek situation. Greek officials have been making more conciliatory remarks. However, Greek PM Tsipras is now saying he may push a vote on any bail out toward a countrywide referendum.
        • The pound continues to surge as it pressed above 1.53. This marks the first time since March 4 that cable has traded above 1.53. The move comes despite a miss on today's Q1 GDP. GDP grew 0.3% in the quarter, the weakest growth since 2012. This will be viewed as a strike against Prime Minister David Cameron ahead of the May 7 elections.
        • The yen continues to press up against resistance levels 118.30-118.50. The consolidation pattern continues to tighten and the moving averages continue to converge, setting up a potentially larger move in yen. Japan saw Retail Sales drop nearly 10% on a y/y basis, missing expectations of a 7.4% decline. Despite the weak data, the Bank of Japan is expected to remain on hold when it meets tomorrow.

        11:06 am - Stocks Up and Bonds Down on Day

        • Around the same time that the bad consumer confidence number was released, Al-Arabiya reported that Iran fired on a U.S. cargo ship and directed it to an Iranian port
          • CNBC is now denying this rumor
        • WTI Crude temporarily spiked on the news. It remains up 0.23% to $57.12/bbl
        • Yield check:
          • 2-yr: +1 bp to 0.55%
          • 5-yr: +3 bps to 1.37%
          • 10-yr: +3 bps to 1.95%
          • 30-yr: +3 bps to 2.65%
          • While Treasuries tried to rally off of the consumer confidence data, they have now settled back towards their lows
          • Greek 10-year yields remain down 76 basis points to 10.80%
          • Below are two versions of the same 10-year note yield hourly chart. One is zoomed in for more detail. We're highlighting the downtrend in yields from the November 7th high. This level seems to have been providing resistance with the exception of that 2-week period in March. A break of this line, if reached again, might generate more selling pressure
            • 10-Year Yield Zoomed out

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            • 10-Year Yield Zoomed in

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            10:19 am - Consumer Confidence Misses Badly

            • The bad consumer confidence number in April (95.2 versus a Briefing.com consensus of 102.2) has prompted equity selling and Treasury buying
            • The US Dollar Index is down 0.65% to 96.14
            • Yield check:
              • 2-yr: unch at 0.54%
              • 5-yr: +1 bp to 1.36%
              • 10-yr: +1 bp to 1.94%
              • 30-yr: +2 bps to 2.64%
            • The present conditions index declined for the third straight month
            • Relatively higher gasoline prices in April and a volatile stock market offset continued improvements in labor market conditions
            • The decline in confidence is unlikely to have much of an impact on consumption trends. Consumption growth relies on income growth. As long as income gains continue, consumption should closely follow
            • 9:28 am - Case-Shiller 20-City Index Beats Forecasts

              • Home prices rose 5% y/y in February, greater than the Briefing.com consensus of 4.7% and the prior, downwardly revised change of 4.5%
              • Prices in San Francisco and Denver rose the fastest
              • Treasuries are selling off on the news
              • Yield check:
                • 2-yr: +2 bps to 0.56%
                • 5-yr: +3 bps to 1.37%
                • 10-yr: +3 bps to 1.96%
                • 30-yr: +4 bps to 2.65%
              • Positioning may be hesitant ahead of tomorrow's first estimate of Q1 GDP and the FOMC
              • Greece is talking about doing a tax amnesty for assets held in Switzerland. The repatriated assets would be taxed at a rate of 15%
              • 8:56 am - Treasuries Under Pressure Before Data

                • The Treasury complex is moving lower ahead of the release of February's Case-Shiller 20-City Index
                • Yield check:
                  • 2-yr: +1 bp to 0.55%
                  • 5-yr: +2 bps to 1.36%
                  • 10-yr: +2 bps to 1.94%
                  • 30-yr: +2 bps to 2.63%
                • Equities have stabilized before their open, with the S&P 500 set to open at 2,105.4, down 3.5 points
                • $/Yen has been grinding higher in sympathy with the sell-off in fixed income
                  • USD/JPY: -0.06% to 119.055
                  • 8:18 am - Sovereign Yields Decline

                    • Greek yields declined again today and led Spanish, Italian, and Portuguese yields lower as well
                    • Whether the market had simply gotten too pessimistic about Grexit or Greek Prime Minister Alexis Tsipras's rejiggering of his negotiating team Monday actually improved prospects for an agreement is hard to tell
                      • After a television interview last night where Tsipras said that he did not have a mandate to continue with the old bailout program, there is speculation that there will be a referendum in Greece
                    • GDP in the U.K. missed estimates, rising only 0.3% in the first quarter versus 0.6% in Q4 2014
                    • EUR/USD: +0.49% to $1.0929
                    • Yield check:
                      • France, 10-yr OAT: -3 bps to 0.40%
                      • Germany, 10-yr Bund: -2 bps to 0.15%
                      • Greece, 10-yr note: -58 bps to 10.98%
                      • Italy, 10-yr BTP: -3 bps to 1.32%
                      • Portugal, 10-yr note: -3 bps to 1.89%
                      • Spain, 10-yr note: -3 bps to 1.29%
                      • U.K., 10-yr Gilt: -2 bps to 1.70%
                      • 7:23 am - Treasuries Trade Sideways

                        • The U.S. Treasury complex was little changed this morning, holding yesterday's gains and potentially awaiting a flight to quality due to some risk aversion in equities
                          • Yesterday's equity trade put in some bearish chart patterns (mostly in the Russell 2000) that has caused some traders/investors to be more risk averse. Whether or not this is just another buying opportunity is anybody's guess. Weakness in the very frothy biotech sector has been noted as well
                        • Yield check:
                          • 2-yr: unch at 0.54%
                          • 5-yr: unch at 1.34%
                          • 10-yr: unch at 1.92%
                          • 30-yr: unch at 2.61%
                            • International News:
                              • GDP in the United Kingdom rose only 0.3% in Q1 2015, lower than expectations and lower than the 0.6% rate of the previous quarter
                                • This may negatively affect the Tories prospects at the polls in the upcoming general election
                              • Greek 10-year yields are now down 48 bps to 11.08%
                                • European officials are talking up the possibility of successful negotiations after PM Alexis Tsipras's shakeup of his team on Monday
                                • The experts think that the shakeup was just window dressing, but the 5-year default probability has declined below 80%
                                • The recent poll showing that 70% of Greeks still want to remain in the single-currency bloc may also be reinforcing optimism
                                  • Data Out Today:
                                    • February Case-Shiller 20-City Index (09:00 ET)
                                    • April Consumer Confidence (10:00 ET)
                                    • $35 billion 5-year note auction (results at 13:00 ET)
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