Treasury Market Preview

Treasury Market Preview by Trade the News Staff

- On the U.S. calendar today at 8:30 a.m. are the releases of Personal Income and Spending, the PCE Deflator and Core, all for December, as well Initial Jobless Claims and Continuing Claims. At 10;00 we have Pending Home Sales for Dec and the ISM Manufacturing Index for January. In pre-market releases, U.S. Challenger reported that job cuts in January were down 39.1% year over year, above last months reading of -49.3%.
- Regarding the release of Core PCE for December, analysts say it is a toss-up wherer the core price index will round up to 0.2% or down to 0.1%. The quarterly average level of the core price index implies that the Decmber increase would round down to 0.1% if the October and November levels are not revised. With respect to the ISM report, following the weaker than expected Chicago PMI yesterday analysts have revised down their forecast with some looking for 51.4.
- The consensus assessment of the FOMC statement is that the FOMC offered a rosier take on the economy by noting signs of stabilization in the housing market and somewhat firmer growth, while acknowledging that core inflation improved modestly in recent months. However, the Fed maintained its tightening bias by leaving language in the the key policy paragraph unchanged.
- In European economic news, Manufacturing PMI was released for a number of countries this morning. German PMI fell to 58.5 from 59.4, French PMI declined to 52.4 from 54.2 and U.K. PMI fell rose unexpectedly to 52.8 from 52. Manufacturing PMI in the Euro-zone fell more than expected to 55.5 from 56.5. In other European news, the German Economics Minister, Glos, said that a strong foundation is in place for further GDP growth. 1.4%. Elsewhere, BOE's Gieve said that long-term interest rates in the U.K. are relatively low and household debt is under the central bank's radar.

TTN's outlook for February is posted at: http://www.tradethenews.com/monthly-forecast.php
 
Treasury Market Preview by Trade the News Staff

- In focus today at 8:30 a.m. are the releases of Non-Farm Payrolls, the Unemployment Rate, Average Hourly Earnings, Average Weekly Hours and Manufacturing Payrolls, all for December. Non-Farm Payrolls are expected to show a rise of 150,000. The Unemployment Rate is seen holding steady at 4.5%. Average Earnings are expected to have risen 0.3%, Weekly Hours to remain unchanged at 33.9, and Manufacturing Payrolls are seen falling 11,000. At 10:00 a.m. we have Factory Hours for Dec. and the Michigan Confidence Index for January. Factory Orders are expected to have increased 1.9%, while the Michigan Index is seen remaining unchanged at 98.0.
- Regarding Non-Farm Payrolls, the latest derivative auction results on NFP reflect expectations of a gain around 160,000. The ADP data from Monday showed that 152K jobs were added in Jan. Some analysts expect that the mild weather in January kept payrolls relatively high.
- After Treasury Secretary Paulson's comment yesterday that sales of Treasuries by China is the least of his concerns, the FT wrote today that bond investors should be concerned. The article says that China, Japan and oil producing countries all have reasons to trim their purchases of U.S. government debt. Barclay's Capital analyst, Bond, says that foreign exchange reserve managers could cut bond buying by a minimum of $100B and, at a maximum, $500B. The impact could be considerable, as current foreign central bank buying of U.S. Treasuries is estimated to be depressing the 10Y yield by between 50 and 100 basis points.
- In European economic news, construction PMI in the U.K. rose unexpectedly in Jan. to 57.9 from 57.5. Also in the U.K., Prime Minister Blair rejected calls to step down, saying it would be wrong for him to resign before the 'cash for honors' probe is completed. Elsewhere, in the Euro-zone, producer prices rose as expected in Dec. by 4.1%. Finally, the newest member of the ECB, Gaspari from Slovenia, lost a vote in parliament for a second term on the Slovakian central bank.
- At 8:10 a.m. the 30Y future is down 1 tick at 110 1/32, the 10Y future is down 1 tick at the 2Y future is of ¼ tick at 101 24/32.

TTN's outlook for February is posted at: http://www.tradethenews.com/monthly-forecast.php
 
Treasury Market Preview by Trade the News Staff

- This week is light in terms of economic releases. In focus today is the release of the ISM Non-Manufacturing Index for Jan. It is seen rising slightly to 57.0 from 56.7. Later this week we have Non-Farm Productivity and Unit Labor Costs for Q4 on Wednesday. On Thursday Wholesale Inventories for Dec. is due out. In other events, six Fed officials will be giving speeches this week, with Bernanke to speak on Tuesday. The G-7 meeting is scheduled for Friday.
- In new supply this week, the Treasury will be selling $13B of 10Y notes on Wednesday and $9B of 30Y bonds on Thursday. Analysts say demand should be good, given that a large paydown of debt in Q2 will improve the markets technical position. Minimal corporate supply is said to be on tap for the week ahead.
- The Commodity Futures Trading Commission reported late last week that futures only positions in the 10Y note future moved less long last week to 253,400 contracts from 294,700 contracts. Futures only positions in the 30Y future moved more short to -88,649 from -76,949 contracts.
- In European economic news, the German DIHK Research Institute said today that the German government's forecast of 1.7% growth is realistic. The institute urged the ECB to keep rates on hold. ECB's Weber said a short while ago that the German inflation outlook is unchanged after the latest CPI data. He sees growth in Germany at 2.0% in 2008. In the U.K. the PMI Services index fell to 59.2 in Jan., below expectations of 60. Also in the U.K. a letter bomb exploded as the offices of Capital Group in Victoria Street. One woman was injured.
- At 8:10 a.m. the 30Y future is up 5 ticks at 110 8/32, the 10Y future is up 2 ticks at 106 25/32 and the 2Y future is up 1 tick at 101 26/32.
 
Treasury Market Preview by Trade the News Staff

- On the U.S. calendar today are the releases of Nonfarm Productivity and Unit Labor Costs for Q4 at 8:30 a.m. Nonfarm Productivity is expected to have risen 2.0%, while Unit Labor Costs are seen falling to 2.1% from 2.3%. In pre-market releases, MBA Mortgage Applications fell 0.2% in the latest week after having risen 3.2% in the previous week. In Fed speak, Plosser speaks on the economic outlook in Philadelphia at 8:15 a.m.
- Today the Treasury will sell $13B in 10Y notes and will sell $9B in 30Y notes tomorrow. Morgan Stanley wrote in a research note to clients on Monday that demand for the 10Y note may be weak because yields are low compared to their 200 day moving average. Yesterday's $16B 3Y note auction is said to have met good demand with a bid-cover of 2.97 and a hefty indirect bid of 32.5%.
- The WSJ reported that risk premiums on the CDX index are hovering around their record narrow levels of around 0.305 percentage point, and, are likely to breach the 0.30 percentrage-point mark.
- In European economic news, Industrial Production in the U.K. fell in Dec. by 0.1% versus expectations of +0.1%. The BRC shop price index in Jan. rose 1.84%. German Industrial production fell 0.5% in Dec, below expectations of +0.5%. In Switzerland, the Unemployment Rate held steady at 3.3% in January. As a reminder, both the ECB and BOE announces rate decisions tomorrow. Both are expected to leave rates on hold at 3.25% and 5.25%, respectively.
- At 8:00 a.m. the 30Y future is down 3 ticks at 110 22/32, the 10Y future is off 1 ½ ticks at 107 2/32 and the 2Y future is off ¼ tick at 101 27/32.
 
Treasury Market Preview by Trade the News Staff

- On the U.S. calendar today are the releases of initial jobless claims, continuing claims and Wholesale Inventories for Dec. Jobless claims are expected to be 312K. Continuing claims are seen falling to 2.495M from 2.553M. Wholesale Inventories are expected to show a rise of 0.5%. No Fed speak is scheduled for today.
- A new round of six party nuclear talks with North Korea began in Beijing today. Discussions are expected to focus on getting the North Korean government to return to a September 2005 agreement under which the Pyongyang would agree to end its nuclear program in return for aid and security guarantees. Analysts are optimistic on the talks in light of reported progress that was made in Berlin recently between U.S. and the North and because of winter food shortage in the latter, which is thought to have changed the dynamics in the run-up to the negotiations.
- Walmart reported Jan. same store sales of 2.2%, matching expectations. The retailer guided Feb. sales between 1.0% and 2.0%.
- HSBC reported late yesterday that its subprime-mortgage problem was worse than previously indicated. The bank said that the capital it set aside to cover all bad debts, including soured mortgages, would be 20%, or $1.76B, higher than analysts's estimates.
- Today the Treasury sells $9B of 30Y bonds, the third leg of the refunding. Yesterday's 10 auction is said to have been decent with a bid-cover of 2.41 and an indirect bid of 30%. Analysts say that the auctions so far have bee quite healthy.
- In Europe, the Bank of England left rates unchanged at 5.25%. Before the announcement, most economists had expected the BOE to leave rates on hold. Also in the U.K, house prices rose 1.3% in Jan. Elsewhere, the ECB left rates unchanged at 3.5%. Trichet will hold his regular news conference later this morning. He is expected to reinsert the 'vigilance' in his statement to signal a March rate hike. In other European economic news, the German trade balance surplus fell sharply and more than expected in Dec to 10.8B euros from 18.3B euros, while the Germany current account surplus fell to 9.8B euros from 14.1B euros.
- In Asia, BOJ Board Member, Haru, said today that the BOJ is in no hurry to raise rates in the absence of an immediate inflation risk, but it is necessary to change rates gradually in order to prevent a sharp fluctuation in economic growth and prices later. He also said that the consumer spending in Japan is not as bad as the data shows and that core consumer price index is on a gradual uptrend despite a swing in energy costs.
- At 8:10 a.m. the 30Y future is down 2 ticks, the 10Y future is down 1 tick at 107 8/32 and the 2Y future is off ¼ tick at 101 28/32.
 
Treasury Market Preview by Trade the News Staff

- No economic releases are scheduled in the U.S. today. In Fed speak, Poole is speaking at 8:30 to a Management Association in New York. Later at 12:00 p.m. Pianalto speaks on the economy. And Fisher speaks on the economic outlook at 1:00 p.m.
- A major wire released the results of a survey, showing that economists are more optimistic about the U.S. economy then they were last month. They predict Q1 growth of 2.5% versus last month’s consensus forecast of 2.3%.
- The WSJ wrote today that South Korea is looking to diversify its rapidly growing foreign reserves away from U.S. Treasuries into other assets, including equities. The central bank said it’s at a very prelimnary stage of the plan.
- In European economic news, French Industrial Production rose 1.1% in Dec., above expectations of +0.3%. The French trade balance deficit increased as expected to 2.9B euros in Dec. from 2.7B in Nov. In Germany, the Wholesale Price Index was flat in Jan., above expectations of 0.0%. In the United Kingdom, the trade balance deficit increased more than expected to 7.142B pounds in Dec. from 6.871B in Nov. The AMS unemployment rate in Switzerland rose to 4.6% in Jan. from 4.3% in Dec.
- In Asia, major wire reported that the debate among the BOJ monetary policy board is now focused on a desirable inflation rate as a precondition for another rate hike. The wire wrote that the majority of the BOJ board still sees no need to raise rates in a hurry because a delay by a month or two would not jeopardize price stability in Japan. In China, the PBOC said today that the pace of growth in the country’s trade surplus is to ease, but to remain high. Additionally, the PBOC sees increasing inflationary pressure.
- At 8:10 a.m. the 30Y future is down 8 ticks at 110 27/32, the 10Y future is off 4 ½ ticks at 107 6/32 and the 2Y future is down 1 tick at 101 27/32.
 
Quote from TradeTheNews:

Yes, we're still posting previews but under a new thread each day. Some people were confused by looking at posts from past dates.
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So where is currently the market preview for the US Treasury Market?

Thank you,
Bernard
 
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