Rates Still Testing Resistance, Still Trying to Re-Enter Range
Good Morning.
No time for any attempts at Monday morning humor...two female suicide bombers hit two separate metro trains in Moscow over a 40 minute period during the morning rush hour, killing at least 38 people and injured 65 more. Here is a map of the events:
No terrorist group has claimed responsibility yet but Federal Security Service (FSB) chief Alexander Bortnikov linked the attacks to Chechnya, where Moscow faces a growing threat from Islamic insurgent leader Doku Umarov, who is fighting for an Islamic emirate embracing the whole region. Umarov last month vowed to take their war to Russian cities saying, "Blood will no longer be limited to our (Caucasus) cities and towns. The war is coming to their cities,"
From Reuters:
The Chechen rebellion began in the 1990s as a largely ethnic nationalist movement, fired by a sense of injustice over the 1940s transportation of Chechens to Central Asia, with enormous loss of life, by dictator Josef Stalin. Largely since the second war, Russian officials say, Islamic militants from outside Russia have joined the campaign, lending it a new intensity.
Prime Minister Vladimir Putin's response: "TERRORISTS WILL BE DESTROYED"
HERE is a Reuters FactBox which provides further background.
U.S markets didn't see much reaction to the event. The 10 yr contract (yellow) did however make a move to and from early session lows after February Personal Income and Spending Data hit screens.
Here is a recap of the data:
- FEB PERSONAL SPENDING: +0.3 PCT vs. CONSENSUS +0.3 PCT vs. JAN +0.4 PCT (PREV +0.5)
- FEB PERSONAL INCOME: UNCHANGED vs. CONSENSUS +0.1 PCT vs. JAN +0.3 PCT (PREV +0.1 PCT)
- FEB CORE PCE PRICE INDEX UNCH (+0.0292; CONS +0.1 PCT) VS JAN UNCH (PREV UNCH)
- FEB YEAR-OVER-YEAR PCE PRICE INDEX +1.8 PCT (JAN +2.1 PCT), CORE +1.3 PCT (JAN +1.5 PCT)
- PERSONAL SAVING RATE 3.1 PCT VS JAN 3.4 PCT
Personal Spending was "on the screws" and Personal Income was slightly worse than forecast but well within the range of estimates. While it's discouraging to see income growth stagnate, consumer spending did increase for the fifth month in a row and the savings rate fell, some may view that as an uptick in consumer confidence. Although TSY futures did bounce after the data I wouldn't give too much credence to the data as providing any ground breaking new evidence of a recovery or retracement. More or less, before the data printed, stateside traders were testing the strength of early session lows. The lack of a scheduled data tapebomb didn't do much to change sentiment, buying at the lows ensued and now 10s are right back to where they went out on Friday.
Plain and Simple: 10s tested the upper limits of the recent range in the overnight session. Since then, status quo has been restored. Benchmark 10 yr TSY note yields are right back to Friday's 5pm marks.
The FN 4.0 is +0-03 at 97-09 yielding 4.264% and the FN 4.5 is +0-03 at 100-16 yielding 4.447%. The secondary market current coupon is 4.438%. The CC yield is 58.5 basis points over the 10yr TSY note yield and 62.9 basis points over the 10 yr swap rate. Testings the previous session high price...
The yield curve is steeper, the dollar is weaker, oil is trading up, and stocks are still in the green.
REPRICES FOR THE BETTER AT 100-23.
REPRICES FOR THE WORSE AT 100-09
10s must break 3.85% and re-enter the 3.57 to 3.85% range for us to see further positive rebound rally progress. Still watching and waiting...