Bond Market Update from Briefing.com

Briefing.com

3:32 pm - Treasuries Eke Out a Gain:

  • Treasuries ended with small gains, paring their early advance.
  • The complex firmed into the cash open and pressed to its best levels of the day in response to the industrial production (-0.1% actual v. 0.3% expected) and capacity utilization (78.8% actual v. 79.3% expected) misses.
  • However, selling would take hold over the remainder of the morning before settling into a lull in afternoon trade. 
  • Up front, the 2Y eased -2bps to 0.540%. Action continues to hold near levels last seen in May 2011. 
  • Outperformance in the belly dropped the 5Y -2.4bps to 1.795% as action slid off one-year highs. Support in the 1.780% area will be watched closely in the days ahead. 
  • The 10Y fell -2.3bps to 2.591%. The benchmark yield spent the entire U.S. session locked in less than 3bp range near two-month highs. 
  • The long bond lagged as the 30Y slipped -1bp to 3.341%. Today's bid dropped action off two-month highs, but was unable to push the yield back below the 100 dma. 
  • Little change along the curve saw the 2-10-yr spread hold @ 205bps.
  • Precious metals finished with small gains as gold added +$2 to $1233 and silver tacked on +$0.02 to $18.63.
  • Data: PPI (8:30) and Net Long-Term TIC Flows (16).

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2:17 pm - Dollar Pauses Near 14-Month Highs:

  • The Dollar Index trades little changed near 80.25. 
  • The greenback tested the 80.40 level in early trade, but surrendered those gains following the disappointing industrial production and capacity utilization data. 
  • EURUSD is -20 pips @ 1.2940 as trade continues to test 14-month lows. Today's trade has been rather quiet for the single currency with action favoring the downside since early this morning. Eurozone data scheduled for tomorrow includes ZEW Economic Sentiment and German ZEW Economic Sentiment. 
  • GBPUSD is -30 pips @ 1.6235 as a schizophrenic trade takes hold ahead of Thursday's vote on Scottish independence. The majority of the weekend polls showed 'NO' is the likely outcome, suggesting Scotland could remain a member of the United Kingdom; however, nothing is certain. Key support rests in the 1.5900/1.6200 region. Britain's CPI, PPI Input, and RPI will be released tomorrow. 
  • USDCHF is +20 pips @ .9350 as trade drifts near one-year highs. The pair saw little reaction to the cooler than anticipated Swiss PPI with action instead dictated by the fluctuations in the euro. 
  • USDJPY is -15 pips @ 107.15 as selling takes hold for the first time in six sessions. The 105.00 area provides the first level of support should the parabolic rise need a breather. Bank of Japan Governor Haruhiko Kuroda will speak tonight in Osaka. 
  • AUDUSD is flat @ .9035 as trade steadies near six-month lows. Weak Chinese data coupled with a drop in new motor vehicles sales was responsible for the overnight weakness, but action has managed to recoup those early losses. The latest Reserve Bank of Australia policy minutes will be released this evening. 
  • USDCAD is -50 pips @ 1.1040 as today's selling has wiped away all of Friday's gains. Near-term support checks in near 1.0980/1.1000. Canadian data is limited to manufacturing sales. Bank of Canada Governor Stephen Poloz speaks tomorrow at the Drummondville Economic Development Society.

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11:50 am - Treasuries Trim Gains:

  • Treasuries remain bid, but leadership has shifted from the long end to the belly
  • After early outperformance, the 30Y holds -0.7bps @ 3.344%. The yield on the long bond approached the 3.300% level, but was able to hold Friday's lows. 
  • The 10Y trades -1.8bps @ 2.596% as action slips off two-month highs. 
  • In the belly, the 5Y is -2.2bps @ 1.797%. Support in the 1.780% area will be watched close.
  • Up front, the 2Y is -1.4bps @ 0.548%. Action continues to hold just shy of levels last seen in May 2011.
  • A steeper curve persists as the 2-10-yr spread trades 205bps.
  • Precious metals cling to small gains with gold +$3 @ $1234 and silver +$0.01 @ $18.62.

9:20 am - Data Reaction II: 

  • Treasuries trade on session highs following the industrial production (-0.1% actual v. 0.3% expected) and capacity utilization (78.8% actual v. 79.3% expected) misses.
  • Buying at the long end has the 30Y -2.8bps @ 3.323%. 
  • A flatter curve has developed as the 2-10-yr spread trades 204bps. 
  • Precious metals are firm with gold +$5 @ $1236 and silver +$0.05 @ $18.66.

8:36 am - Data Reaction:

  • Treasuries test session highs following the strong Empire Manufacturing (27.5 actual v. 16.0 expected, 14.7 prior).
  • Early buying has yields across the curve lower by -1/-2bps.
  • The 10Y is off -1.2bps @ 2.602%. 
  • A steeper curve has developed as the 2-10-yr spread trades 205.5bps.
  • Precious metals are bid with gold +$5 @ $1236 and silver +$0.02 @ 18.63. 
  • Industrial production and capacity utilization are due out at 9:15am ET.

7:55 am - European Yields

  • Yields are lower across most of Europe. 
  • The eurozone trade surplus narrowed to EUR12.2 bln (EUR15.9 bln expected, EUR13.8 bln previous). 
  • Germany Bunds lag the rest of the region as light selling has yields across most of the curve higher by +2bps. The 10Y is @ 1.020% as action probes one-month highs.
  • UK Gilts are ticking higher as tensions ease in response to the latest poll suggesting 54% will vote 'NO' in the Scottish referendum. A -1bp slip has the 10Y down to 2.525%.
  • French OATs are edging up amid an uneventful trade. The 10Y is lower by -1bp @ 1.430%. 
  • Italian BTPs hold small gains. A -1bp drop has the 10Y @ 2.460% as action eases off one-month highs
  • Spanish Bonos outperform as fears of an independent Catalonia have subsided for the time being. The 10Y is down -4bps @ 2.335%.

7:10 am - Euro Tests 14-Month Lows:

  • The Dollar Index presses session highs near 84.35 as trade holds onto a slim 0.1% gain. 
  • EURUSD is -40 pips @ 1.2920 as action tests session lows following the narrower than anticipated eurozone trade surplus (EUR12.2 bln actual v. EUR15.9 bln expected, EUR13.8 bln previous). The recent lows near 1.2900 coincide with levels last seen in July 2014 and remain under close watch. 
  • GBPUSD is -25 pips @ 1.6240 as light selling takes hold for a second session. Action is likely to be whippy over the coming days as the outcome of Thursday's Scottish independence vote hangs in the balance. 
  • USDCHF is +30 pips @ .9360 as trade looks to retest one-year highs. Today's Swiss PPI (-0.2% MoM actual v. 0.2% MoM expected) miss may have had a small impact on action, but action remains tightly correlated with the euro. 
  • USDJPY is -5 pips @ 107.25 ass sellers look to put in the first losing session in six days. Today's action has been rather light, limited to a tight 20 pip range as Japanese banks were closed in observance of Respect-for-the-Aged-Day.
  • AUDSD is -20 pips @ .9020 as selling persists for a sixth straight day. The hard currency is lower after Australian new motor vehicle sales fell -1.8% MoM and Chinese data out over the weekend saw both industrial production (6.9% YoY actual v. 8.8% YoY expected) and fixed asset investment (16.5% YTDoY actual v. 16.9% YTDoY expected) fall short of estimates. USDCNY ticked up to 6.1420.
  • USDCAD is -10 pips @ 1.1080 as trade struggles near five and a half-month highs. The 1.0975 area provides near-term support while the March highs in the 1.1250 region are likely to offer some resistance.

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6:45 am - Treasuries Firm in Early Trade:

  • Treasuries hold small gains ahead of the cash open. 
  • A quiet overnight session saw yields stuck in a tight 2.5bps range. 
  • Up front, the 2Y is -0.8bps @ 0.552%. Action continues to test levels last seen in May 2011
  • In the belly, the 5Y is -1.5bps @ 1.804%. The yield remains within a couple of bps of its highest print since July 2011.
  • The 10Y trades -1.5bps @ 2.599%. Traders have an eye on the 2.650% level as resistance there is helped by the 200 dma.
  • Buying at the long end has pushed the 30Y lower by -1.5bps to 3.336%. The 3.255% area and the 50 dma will see a test on pullback to support. 
  • A slightly flatter curve has taken hold as the 2-10-yr spread trades 204.5bps
  • Precious metals are firm with gold +$4 @ $1235 and silver -$0.03 @ $18.64.
  • Data: Empire Manufacturing (8:30), industrial production, and capacity utilization (9:15).

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