Bond Market Update from Briefing.com

3:36 pm - Treasuries Mixed as Curve Steepens

  • 10 and 30-years lost ground today while 2 and 5-year notes were unchanged 
  • Yield check:
    • 2-yr: unch at 0.60%
    • 5-yr: unch at 1.50%
    • 10-yr: +3 bps to 2.14%
    • 30-yr: +5 bps to 2.88%
    • News:
      • China's HSBC Manufacturing PMI fell to a lower-than-expected 48.9 in April. The preliminary number was 49.2 and the Purchasing Managers' Index was at 49.6 in March
      • Factory Order growth in March was 2.1%, in-line with the Briefing.com consensus and much better than the fall of 0.1% in February
        • Almost the entire gain could be attributed to a bump in aircraft orders, which increased 41.9% in March
        • This was the first m/m increase since July of 2014
      • Chicago Fed President Evans (known dove and FOMC voter) said that he probably would not support a rate hike until early 2016
        • He said the risks of an early hike outweigh the risks of a late one and that Fed policy should arguably be more accommodative
        • The 30-year bond yield hit its 200-day moving average (2.87%) for the first time since March of 2014
          • Commodities:
            • WTI Crude: -0.36% to $58.94/bbl
            • Gold: +1.16% to $1,188.10/troy oz.
            • Copper: -0.53% to $2.914/lb.
            • Currencies:
              • EUR/USD: -0.49% to $1.1145
              • USD/JPY: -0.03% to Y120.14
              • Data Out Tuesday:
                • March Trade Balance (08:30 ET)
                • April ISM Services (10:00 ET)
              • Fed Speaker: 
                • Minneapolis Fed President Kocherlakota (non-FOMC voter) (20:00 ET)
                • 2:25 pm - Dollar Extends Winning Streak to Two

                  • The U.S. Dollar Index rallied 0.10% to 95.40 today. The April employment report will be released on Friday
                    • The euro currency accounted for most of the dollar's rally, with EUR/USD declining 0.51% to $1.1144. 
                  • The pound sterling fell 0.12% to 1.5120. The U.K. will hold its national election on May 7th and there is considerable uncertainty surrounding the outcome
                  • USD/JPY fell 0.05% to Y120.10
                  • AUD/USD fell 0.07% to $0.7845
                    • The Reserve Bank of Australia will meet Tuesday, and is widely expected to cut rates
                    • NZD/USD fell 0.08% to $0.7534
                    • USD/CAD fell 0.37% to 1.2114
                    • USD/CHF  rallied 0.15% to 0.9341
                    • 12:57 pm - Chicago Fed President Evans Speaks

                      • In a speech in Columbus, IN, Charles Evans, an FOMC voter and renowned inflation dove, said that the Fed should wait to hike rates until early in 2016
                        • He said that one could argue that Fed policy should be more accommodative 
                        • He said that unemployment is about a half percentage point than it should be (UE is currently 5.5%)
                        • Evans said that inflation will not likely get back to 2% until 2018 and that this is more important than the unemployment rate
                      • Yield check:
                        • 2-yr: +2 bps to 0.61%
                        • 5-yr: unch at 1.50%
                        • 10-yr: +2 bps to 2.13%
                        • 30-yr: +4 bps to 2.87%
                        • Some mild selling pressure has hit the equity market and this may be helping to stabilize Treasuries
                        • The last uptrend on the TLT's daily chart is right around its low today. We have also violated the 200-day moving average, although many systems look for a close below that level rather than an intraday violation. It might be a level to watch. We remain concerned that the higher low in yields occurred in March and April and that there could be more Treasury selling to come, at least in 10's and 30's
                        • TLT Daily Chart: 
                        • View photo

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                          11:52 am - Carl Icahn Sounds Alert on High-Yield

                          • The 30-year Treasury bond has made a fresh session low, while 5's and 10's are holding up better and 2's are in positive territory
                          • Yield check:
                            • 2-yr: unch at 0.60%
                            • 5-yr: unch at 1.50%
                            • 10-yr: +1 bp to 2.13%
                            • 30-yr: +3 bps to 2.86%
                          • In a Business Insider interview on Sunday, Carl Icahn warned about the junk bond market:
                            • "I think default rates are going to go up in this market"..."You see all these high-yield funds ... money keeps going into them. ... When they [the bonds] start coming down there's going to be a rush for the exits. What is even worse is, even in '08 ... you had a bit of a safety net because of the prop desks at banks, but today with the Volker Rule ... there's no catching it."
                            • 11:30 am - Treasuries Slip Back

                              • Government notes and bonds are pulling back as they appear to wait for more equity selling that just will not materialize
                              • Yield check:
                                • 2-yr: -1 bp to 0.59%
                                • 5-yr: unch at 1.50%
                                • 10-yr: +1 bp to 2.12%
                                • 30-yr: +2 bps to 2.85%
                              • Equities have shaken off Thursday's rout and European indices have turned higher as well
                              • Bill Gross is saying that the bull market "supercycle" for stocks is in its final stages because the monetary policy that has been supporting stock and bond prices is losing its kick
                              • Greek 10-year note yields are holding steady at 10.45%, up 5 basis points on the day but down from 13.44% on April 21st
                              • 11:20 am - Fed Speak, Jobs Report on Tap: The Dollar Index is testing 95 for support as we kick off another week of trade. At the end of the week the markets will get the April jobs numbers. This will be closely watched report, especially after the March numbers fell far short of expectations. The DXY is in the midst of testing key support levels ahead of the news. The ADP jobs report released Wednesday morning will help set the tone ahead of the jobs numbers. It will also be a busy week for Fed speakers with Rosengren, Tarullo, Evans and Williams all expected to speak tonight. 

                                • The euro is bumping into resistance at the 100 sma (1.1280). PMI data was mixed to light but is not having much of an impact on trade at the moment. There are some hopes that a new Greek negotiating team will be able to improve the discussions that will lead to a solution for the two sides. 
                                • The pound is seeing some profit taking following its recent rally. The U.K. is closed today for a banking holiday so the trade does remain light. The move comes ahead of the May 7 elections which is help adding pressure. The outcome from the elections remains uncertain which should keep pressure on cable.
                                • The yen is testing the 120 level for support. Yen spent most of last week trying to push through 119 with little success. THat has led to some small selling in the yen. But the overall pattern of tight consolidation remains the dominant theme for yen. the 20-, 50-, and 100-sma are all converging and have a range of 119.30-119.89. Japanese markets were also closed for holiday today

                                10:26 am - March Factory Orders Match Consensus Estimate

                                • Factory Order Growth in March was 2.1%, in-line with the Briefing.com consensus and much better than the fall of 0.1% in February
                                • The Treasury market's initial reaction was muted, although 5's and 10's are meaningfully higher
                                • Yield check:
                                  • 2-yr: unch at 0.60%
                                  • 5-yr: -1 bp to 1.49%
                                  • 10-yr: unch bbp at 2.12%
                                  • 30-yr: unch at 2.83%
                                • The March gain was the first month-over-month increase since July 2014. Unfortunately, almost the entire gain can be attributed to a bump in aircraft orders, which increased 41.9% in March. 
                                • Durable goods orders were revised up from 4.0% in the advance estimate to 4.4%. Durable goods orders declined 1.4% in February. Excluding transportation, durable goods orders were revised up from -0.2% to +0.4%. 
                                • Non-durable goods orders declined 0.3% in March after increasing 1.1% in February. Higher petroleum prices weren't enough to keep petroleum refinery orders (-1.9% from +10.4%) in the black. 
                                • Orders of non-defense durable goods excluding aircraft were revised up to +0.1% from -0.5% in the advance release. Shipments, which factor into future Q1 2015 GDP revisions, were unrevised at -0.4%.

                                • 9:50 am - Treasury Complex Pushes Higher Before Factory Orders

                                  • Boston Fed President Rosengren and FOMC Governor Tarullo said nothing of consequence this morning in Boston
                                  • March Factory Orders will be released at 10:00 ET
                                    • The Briefing.com forecast is for 2.5%, the Briefing.com consensus calls for 2.1%, and the February reading was 0.2%
                                  • There have been some signs of wage growth in the U.S. economy
                                    • The March employment report pegged wage growth at 2.1% for Q1 versus 2.0% for Q4 2014
                                    • The Employment Cost Index, released last Thursday, showed higher growth of 2.5%
                                    • There have also been myriad announcements of pay hikes for low-wage workers at companies like Walmart and McDonald's
                                    • Yield check:
                                      • 2-yr: -1 bp to 0.59%
                                      • 5-yr: -2 bps to 1.48%
                                      • 10-yr: -2 bps to 2.10%
                                      • 30-yr: -1 bp to 2.82%
                                      • 8:59 am - Traders Look for Relief Rally

                                        • Treasuries have recovered their overnight losses after the open as we begin a trading session filled mostly with Fed speakers
                                        • Warren Buffett has joined the bearish camp for 30-year Treasury bonds
                                          • He said that if he "had an easy way, and a non-risk way of shorting a whole lot of 20- or 30-year bonds, [he'd] do it"
                                        • Yield check:
                                          • 2-yr: -2 bps to 0.58%
                                          • 5-yr: -2 bps to 1.48%
                                          • 10-yr: -2 bps to 2.10%
                                          • 30-yr: -2 bps to 2.81%
                                          • China has approved 32 foreign institutions including Morgan Stanley and HSBC to participate in its domestic bond market. This is a welcome development to those who want to see China's economy liberalized, and a large opportunity for those companies now allowed to participate. China's domestic bond market is worth $5.95 tln 
                                          • 7:57 am - Yields Follow Through Higher

                                            • Last week's sell-off in European sovereign debt continued on Monday as European Manufacturing PMI's came out mixed
                                            • The April Manufacturing PMI for the eurozone was 52.0, slightly ahead of expectations and higher than the 51.9 reading from March
                                            • Individual country Manufacturing PMI's:
                                              • France: 48.0 versus 48.4 prior
                                              • Germany: 52.1 versus 51.9 prior
                                              • Italy: 53.8 versus 53.3 prior
                                              • Spain: 54.2 versus 54.3 prior
                                            • Yield check:
                                              • France, 10-yr OAT: +5 bps to 0.68%
                                              • Germany, 10-yr Bund: +3 bps to 0.40%
                                              • Greece, 10-yr note: +5 bps to 10.45%
                                              • Italy, 10-yr BTP: +2 bps to 1.51%
                                              • Portugal, 10-yr note: +1 bp to 2.10%
                                              • Spain, 10-yr Bono: -2 bps to 1.47%
                                              • U.K., 10-yr Gilt: +1 bp to 1.86%
                                              • 7:19 am - Global Rates Rise

                                                • Treasuries sold off overnight, as European and Japanese government bond yields pushed higher
                                                • Yield check:
                                                  • 2-yr: unch at 0.60%
                                                  • 5-yr: +1 bp to 1.52%
                                                  • 10-yr: +1 bp to 2.13%
                                                  • 30-yr: unch at 2.83%
                                                  • International News:
                                                    • China's HSBC Manufacturing PMI fell to a lower-than-expected 48.9 in April. The preliminary number was 49.2 and the Purchasing Managers' Index was at 49.6 in March
                                                    • Germany's Manufacturing PMI rose to a better-than-expected 52.1 in April from 51.9 in March
                                                    • Manufacturing PMI's beat expectations in Switzerland and Italy too, while they disappointed in Spain and France. The Manufacturing PMI for the eurozone as a whole beat expectations in April at 52.0, versus 51.9 in March
                                                    • India's Markit Manufacturing PMI for April disappointed at 51.30 versus a prior reading of 52.10
                                                    • Voters in the U.K. will go to the polls on May 7th and the result remains highly uncertain
                                                    • Data Out Today:
                                                      • March Factory Orders (10:00 ET)
                                                    • Fed Speakers
                                                      • Boston Fed President Rosengren (non-FOMC voter) (09:00 ET)
                                                      • Fed Governor Tarullo (FOMC voter)(09:00 ET or later)
                                                      • Chicago Fed President Evans (FOMC voter) speaks on current economic conditions and monetary policy (12:25 ET)
                                                      • San Francisco Fed President Williams (FOMC voter) speaks in San Francisco on 'Creating Jobs and Economic Opportunity through Small Business' (15:10 ET)
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