Bond Market Update from Briefing.com

Briefing.com

11:40 am -

BoJ Leaves Program Unchanged, FOMC Provides Few Clues: The Dollar Index came under early selling pressure after the Bank of Japan failed to meet high stimulus expectations. The surge in the yen helped lead the greenback lower as it fell through 94 support. The DXY had been consolidating after the latest FOMC decision. The central bank left rates unchanged, which was widely expected. But the statement did not offer any information that would suggest a June rate hike. Both doves and hawks were able to take comments that supported their arguments but in reality it was basically a carbon copy of the March comments. So the Fed remains data dependent and with that in mind the Q1 GDP missed expectations. While it was expected to be weak the +0.5% increase fell well short of the +0.9% consensus. This is the first look so markets will be awaiting some reports to try and smooth out the figure for a cleaner read.

  • The euro was able to rally to 1.1370 before seeing some resistance. The single currency has slipped back to the lower 1.13 area since hitting session highs. German CPI numbers came in line with expectations but remain weak while Consumer and Business Confidence reports from around the region were mixed.
  • The pound continues to probe the 1.46 area for resistance. Sterling has turned into a sentiment trade on Brexit. With rising expectations for UK to stay in the EU, some of the uncertainty has been taken out of the markets and led to buying cable. But the gains remain fleeting as headlines continue to provide threats from both directions.
  • The yen saw an aggressive move lower after the Bank of Japan held off on providing more stimulus. Expectations were wide with thoughts that it could lower rates into further negative territory, double a ETF buying program, add to an existing JGB buying program, or offer a lending window to corporations that would have a negative rates. None of this materialized as the central bank said it would like to study its NIRP policy further before making any changes. This led the yen to rally 3%. It hit a high of 107.92, just 30 pips from its multi-year high it hit on April 11.

11:27 am -

Treasury Auction Preview

  • $28 bln 7-year Treasury auction (results at 13:00 ET)
    • Prior auction results:
      • High yield: 1.606%
      • Bid-to-cover: 2.51
      • Indirect bid: 57.8%
      • Direct bid: 15.5%
    • Average results of prior 12 auctions:
      • High yield: 1.900%
      • Bid-to-cover: 2.45
      • Indirect bid: 55.5%
      • Direct bid: 12.9%
      • 11:00 am -

        Crude Oil in Range, Stocks on Highs

        • Treasuries have steadied this morning as the Tplex continues to deal with the crosscurrents of rallying share prices and weaker-than-expected U.S. economic data. The S&P 500 is up 0.01% to 2,095.2 from Tuesday's close but up almost 10 points from this morning's open. The U.S. Dollar Index is 0.42% to 93.99 and gold is up 0.65% to 1,258.5/troy oz.
        • Regarding the disappointing advanced Q1 GDP growth report, some economists are expressing optimism for a Q2 rebound because an inventory drawdown in Q1 should lose steam, seasonal factors have historically been undercompensated for in the first quarter, and durable goods orders are stabilizing
        • Natural gas in storage rose by 73 bln cubic feet for the week ending April 23, more than the 70 bcf that analysts were expecting
        • Yield Check:
          • 2-yr: unch at 0.82%
          • 5-yr: +1 bp to 1.33%
          • 10-yr: +1 bp to 1.86%
          • 30-yr: unch at 2.71%
        • 10-Year Yield (15-Minute Bars):
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          • June Natural Gas (Daily): 

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          9:57 am -

          Stocks and Oil Rally Back

          • Treasuries are lower but steady this morning as the two central bank decisions over the past 24 hours -- the Fed's dovish-hold and the Bank of Japan's hold -- create significant volatility but not a lot of upward progress. As noted earlier, the S&P 500 found support overnight at its 21-day moving average and now has a decent shot of moving up to test its all-time high. If that scenario comes to pass, it could easily weigh on Treasury prices, which were in the middle of a bear move until Tuesday's interruption. The economic data for March have been pretty bad, but Treasuries have failed to rally on the releases of that data, and now the technical picture for Treasuries is showing signs of deterioration in the short and medium terms
          • The S&P 500 is down 0.15% to 2,092.1, up from an overnight, futures-implied low of 2,082.1
          • WTI crude has rebounded to trade up 0.44% to $45.53/bbl. and gold is up 0.53% to $1,257.3/troy oz.
          • The U.S. Dollar Index is down 0.44% to 93.97
          • Yield Check:
            • 2-yr: -1 bp to 0.81%
            • 5-yr: +1 bp to 1.33%
            • 10-yr: +1 bp to 1.86%
            • 30-yr: +1 bp to 2.72%
          • 10-Year Yield (Daily, Zoomed Out):
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            • 10-Year Yield (Daily, Zoomed In):

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            9:09 am -

            Stocks Stabilize After BoJ

            • Treasuries continue to give back their overnight, Bank of Japan-announcement gains and the 30-year is now roughly unchanged from its pre-FOMC level. The U.S. economic data for today's session is complete except for the natural gas weekly storage number, due out at 10:30 ET. There is also a $28 bln 7-year Treasury auction with results out at 13:00 ET.
            • The S&P 500 (implied price from the futures) traded down to its 21-day moving average (2,075.7) overnight for the first time since April 12. So far, the 21-day is providing support
            • Yield Check:
              • 2-yr: unch at 0.82%
              • 5-yr: +1 bp to 1.33%
              • 10-yr: +1 bp to 1.86%
              • 30-yr: +1 bp to 2.72%
            • 10-Year Yield (15-Minute Bars):
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              8:44 am -

              Treasuries Sell Off

              • The U.S. economy grew at a 0.5% annualized rate in the first quarter of 2016, the slowest pace in two years. The Briefing.com consensus was 0.9% and GDP growth in Q4 2015 was 1.4%. The greatest contributing factor to the very sluggish growth rate was nonresidential fixed investment, which fell at a 5.9% annualized rate. That is the worst showing for that component since Q2 2009
                • The chain deflator rose 0.7% in Q1, beating the Briefing.com consensus of 0.6%. The Q4 2015 reading was 0.9%
              • Initial jobless claims rose to 257K for the week ending April 23 from the prior reading of 247K (a multi-decade low). The Briefing.com consensus was 259K
                • Continuing jobless claims fell by 5K souls to 2.13 mln for the week ending April 16. That is a 15-year low
                • Treasuries are sharply lower after the GDP report, which does not jive with the textbook response to this miss but does make sense if you believe that Treasury traders who bought after Tuesday's FOMC announcement kept tight stops and if you believe that the market did not have enough short interest to generate a sustainable bounce
                • The S&P 500 is indicated to open down 0.65% to 2,081.9 and the US. Dollar Index is down 0.51% to 93.91
                • WTI crude is up 0.42% to $45.52/bbl. and Gold is up 0.51% to $1,256.1/troy oz.
                • Yield Check:
                  • 2-yr: -2 bps to 0.81%
                  • 5-yr: unch at 1.32%
                  • 10-yr: unch at 1.86%
                  • 30-yr: +1 bp to 2.71%
                  • 8:22 am -

                    Yields Sink After BoJ

                    • European sovereign debt is trading higher across the board this morning as the gains following the FOMC's dovish statement released Tuesday were followed by safe-haven buying as global equities sank of the Bank of Japan's hawkish stance. 
                    • Greek news is moving back to the front burner as the official creditors -- the European Commission, International Monetary Fund, and European Central Bank -- have yet to conclude the first review of the third bailout, which was supposed to be completed in October 2015. The latest impasse is over automatic spending cuts if Greece fails to meet its fiscal targets by 2018, with Greece's Syriza-led government protesting that it cannot legislate on a hypothetical event. The Greek government said that it has already undertaken the fiscal measures agreed in 2015. The official creditors are saying that there can be no debt relief without these measures
                    • European News:
                      • The composite index of the eurozone's Business and Consumer Survey rose more than expected to 103.9 in April from 103.0 in March
                        • Consumer Confidence improved to -9.0 from -9.7, as expected
                        • The Business Climate subindex held steady at 0.1, as expected
                        • Consumer Inflation Expectations rose to 2.9 from 2.1
                        • Services Sentiment jumped to 12.0 from 9.6, well ahead of expectations while Industrial Sentiment improved to -4.0 from -4.2, as expected
                      • German unemployment unexpectedly fell by 16K workers in April after falling by just 3K in March
                        • German unemployment remained at a record-low 6.2% in April, as expected
                        • Germany's consumer price index fell 0.2% m/m in April, in line with estimates but a reversal of the 0.8% jump in March
                          • The harmonized index of consumer prices fell 0.1% m/m in April, missing forecasts after rising 0.1% in March
                          • Spain's consumer price index rose 0.7% m/m in April, missing economists' forecasts but accelerating from 0.6% growth in March
                            • Spain's harmonized index of consumer prices climbed 0.4% m/m versus 2.0% prior
                            • The U.K.'s Nationwide House Price Index grew 4.9% y/y in April, just slightly behind estimates. The index was up 5.7% in March
                            • Yield Check:
                              • France, 10-yr OAT: -5 bps to 0.59%
                              • Germany, 10-yr Bund: -5 bps to 0.24%
                              • Greece, 10-yr note: -7 bps to 8.72%
                              • Italy, 10-yr BTP: -5 bps to 1.46%
                              • Portugal, 10-yr PGB: -7 bps to 2.93%
                              • Spain, 10-yr ODE: -4 bps to 1.59%
                              • U.K., 10-yr Gilt: -4 bps to 1.59%
                              • 7:26 am -

                                Treasury Yields Drop on BoJ

                                • U.S. Treasuries are higher this morning after the Bank of Japan's decision last night to keep rates on hold sent global equities and the U.S. dollar lower. Today's session features the first official estimate of U.S. GDP growth for Q1 2016. The S&P 500 is set to open down 0.68% to 2,081.1 and the U.S. Dollar Index is down 0.54% to 93.85. WTI crude is down 0.40% to $45.15/bbl. and gold is up 0.50% to $1,256.7/troy oz.
                                • Yield Check:
                                  • 2-yr: -2 bps to 0.80%
                                  • 5-yr: -1 bp to 1.31%
                                  • 10-yr: -2 bps to 1.83%
                                  • 30-yr: -3 bps to 2.68%
                                  • International News:
                                    • The Bank of Japan left is main policy rate at -0.10% at its April meeting, sending the yen soaring by the most in eight months. Economists had been roughly split on the possibility of more easing from the BoJ, so the dramatic market reaction surprised many investors
                                      • Japan's National Core CPI fell 0.3% y/y in March, worse than expected after prices were stagnant in February
                                      • The core CPI for the Tokyo region fell 0.3% y/y in April, in line with both expectations and March's change 
                                      • Construction orders jumped 19.8% in the year to March after falling 12.4% y/y in February
                                      • Housing starts grew 8.4% y/y in March, beating forecasts for a decline after 7.8% growth in February
                                    • The Reserve Bank of New Zealand kept its main policy rate at 2.25%, but paved the way for further easing. The statement said that "further policy easing may be required to ensure that future average inflation settles near the middle of the target range."
                                    • The composite index of the eurozone's Business and Consumer Survey rose more than expected to 103.9 in April from 103.0 in March
                                    • German unemployment unexpectedly fell by 16K workers in April after falling by just 3K in March
                                      • German unemployment remained at a record-low 6.2% in April, as expected
                                      • Spain's consumer price index rose 0.7% m/m in April, missing economists' forecasts but accelerating from 0.6% growth in March
                                        • Spain's harmonized index of consumer prices climbed 0.4% m/m versus 2.0% prior
                                        • The U.K.'s Nationwide House Price Index grew 4.9% y/y in April, just slightly behind estimates. The index was up 5.7% in March
                                          • Data out Today:
                                            • Q1 GDP and Chain Deflator - Advanced Estimate (08:30 ET)
                                            • Initial Jobless Claims for the week ending 4/23 and Continuing Jobless Claims for the week ending 4/16 (08:30 ET)
                                            • Natural Gas Inventories for week ending 4/23 (10:30 ET)
                                          • Treasury Auction:
                                            • $28 bln 7-year Treasury auction (results at 13:00 ET)
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