Resistance Broken

This is an excerpt from a piece written by Steve Feiss of Government Perspectives. The excerpt summarized dealer views on the break of resistance on the 10 year note at 2.28/2.30 and what that signals for the near term course of interest rates. If you have Twitter you can follow Steve Feiss  @stevefeiss. Via Steve Feiss at Government Perspectives:

Ø  CitiFX Weekly RoundUp: Sacre Bleur. To parity and beyond? … and on US RATES (“flip a coin”), “The 2.30% area we have been highlighting on US 10s is now coming under pressure. Our medium to long term bias of higher US yields remains unchanged; however, the question is whether the base is in from which we will move higher or whether a broader decline (position flush out) will first be seen before higher levels later in the year. Unfortunately, for the time being, the answer Continue reading "Resistance Broken"

Impending Debt Crisis

Via UK Telegraph and Ambrose Evans Pritchard:

Dealing With Debt

Carmen Reinhart spoke yesterday at Harvard (where she teaches) and one of my contacts summarized her comments:

·         The debt overhang in Europe will act as a constraint on ECB policy and she expects no action by the ECB this year (although they will need to announce something about the current Asset Purchase Program which is set only through December).

·         Target 2 (T2) balances, which represent claims on the financial systems within the EZ (banks in Greece lost deposits to banks in Germany, so the Central Banks must square up these flows) are an representation of FX rates within the EUR. In other words, if there were floating exchange rates within the EUR the large capital outflow from Greece, Spain and Italy, among others, would have forced devaluations of their currencies and the capital flight into Germany a revaluation of its (non-existent) currency. The large magnitude of Continue reading "Dealing With Debt"

FX

Via Marc Chandler at Brown Brothers Harriman: Dollar Pushed Lower in Subdued Activity
  • Geopolitical concerns continued to be elevated
  • Oil is threatening to snap a five-day rally
  • There is little concession built for today’s $20 bln auction of US 10-year notes
  • South Africa and Mexico report February manufacturing and industrial production
The dollar is mostly softer against the majors.  The Scandies are outperforming, while the dollar bloc is underperforming.  EM currencies are mixed.  ZAR and RUB are outperforming, while MXN and KRW are underperforming.  MSCI Asia Pacific was down 0.1%, with the Nikkei falling 0.3%.  MSCI EM is down 0.1%, with China markets rising 0.3%.  Euro Stoxx 600 is flat near midday, while S&P futures are pointing to a lower open.  The 10-year UST yield is down 2 bp at 2.34%.  Commodity prices are mixed, with oil down 0.3%, copper up 0.2%, and Continue reading "FX"

FX

Via Marc Chandler at Brown Brothers: Drivers for the Week Ahead
  • Even though the Federal Reserve does not meet, Yellen’s speech on Monday (with live and Twitter-sourced questions) will be closely monitored
  • Economic data for the US and Europe may not be important drivers
  • The UK reports on inflation and employment in the holiday-shortened week
  • EM FX weakness is carrying over to this week, due in large part to rising political risks
The dollar is mostly firmer against the majors as the holiday-shortened week starts.  Markets remain nervous after US missile strikes on Syria, amidst reports that a US aircraft carrier has been diverted to waters near North Korea.  Sterling and Nokkie are outperforming, while the euro and Aussie are underperforming.  EM currencies are mostly weaker.  IDR and PHP are outperforming, while ZAR and KRW are underperforming.  MSCI Asia Pacific was flat, with the Nikkei rising 0.7%.  MSCI EM Continue reading "FX"

Treasury Auctions This Week

The Treasury will auction 3s 10s and 30s this week. Here is some interesting commentary from Ian Lyngen at BMO Capital markets on auction dynamic. This is an excerpt from a longer note to clients:

We’ll also see the takedown of the 3s, 10s, 30s trio of Treasury auctions on an accelerated scheduled with the first installment on Monday afternoon. While the shift in timing and holiday closures might intuitively be concerns for auction participation, this week’s $56 bn in gross issuance will be more than offset by $76.8 bn in maturities, leaving a net paydown of $20.8 bn.  For context, this will be the largest paydown on record for this trio and in fact, one needs to go back to May 2008 (prior to the introduction of the 3-year) for find a larger paydown. The influence on the auction process is less obvious from the net Continue reading "Treasury Auctions This Week"

Jobs Report Dissected

Via TDSecurities:

·         The March employment report was a mixed bag on the surface, with payrolls disappointing sharply. But this apparent softness was more than offset by a significant and healthy drop in the unemployment rate and continued firming in wage pressures.

                                                                                      

·         The as-expected wage growth and out-sized decline in the unemployment rate suggest a June rate hike is still very much in play at the Fed, especially if weather was a factor driving the weakness in payrolls.

 

Nonfarm payrolls moderated much more than expected with a 98k increase in March vs a downwardly revised 219k in February. Net revisions over the prior two months totaled -38k. A return to more seasonal winter temperatures along with snowstorms in the eastern region had been expected to dampen the March figures. Adverse weather impacts appeared evident in construction payrolls, where job growth pulled back sharply (+6k) after Continue reading "Jobs Report Dissected"