The Day Ahead: Fed Speakers and 7-Year Treasury Note Auction

Benchmark interest rates are modestly higher and equity futures are mixed as investors prepare for a dataless U.S. trading session, this puts the focus on a slew of Federal Reserve speakers, a Treasury auction, and overseas events.

S&P 500 futures are up 1.75 handles at 1,143.50 and Dow futures are 11 points lower at 10,777.  Meanwhile, the yield curve is slightly steeper with 2s/10s at 205bps wide. The 2-year Treasury note is -0-00+ at 99-28 yielding 0.438% (+.04bp). The 10-year Treasury note is -0-04+ at 101-07 yielding 2.483% (+1.4bps).

Overnight trading flows in U.S. Treasuries were two way but generally light as the debate for further Federal Reserve quantitative easing continues. The latest development comes from Atlanta Fed President Dennis Lockhart, who late yesterday afternoon indicated that another QE program is not a done deal. Still he was quite cautious about dismissing the threat of deflation, leaving the door wide open for the Fed to act accordingly if necessary.  READ MORE

Light crude oil is trading 0.22% higher at $76.35 per barrel, and gold prices are up 0.08% at $1,308.40 per ounce.

Meanwhile, the US dollar index is moving lower towards its lowest level this year.

In early data this morning, the MBA Mortgage Applications index reported that applications fell 0.8% in the week ending Sept. 24.

Refinancings fell 1.6% for the the fourth straight week, despite the average 30-year fixed-rate mortgage declining to 4.38% from 4.44%. Purchases increased 2.4% in the week, driven by a 4.5% gain among government purchase applications. 

“Mortgage purchase applications have been stable over the past month but remain at an extremely depressed level,” said economists at Nomura before the release. “The lack of recovery in applications suggests home sales are likely to remain subdued over the near term.”

Key Events Today:

10:15 ― Narayana Kocherlakota, president of the Minneapolis Fed, speaks in London on “Economic Outlook and the Current Tools of Monetary Policy” at a European Economics and Financial Centre Distinguished Speakers Seminar.

12:30 ― Charles Plosser, president of the Philadelphia Fed, speaks on unwinding monetary stimulus to the Greater Vineland Chamber of Commerce in Vineland, New Jersey.

1:15 ― Eric Rosengren, president of the Boston Fed, speaks before the Forecasters Club of New York.

ISSUANCE
* 11:30 Treasury auctions $25 bln 57-day SFP bills
* 13:00 Treasury auctions $29 bln 7-year notes
* BNG, benchmark 5-year; BAML/JPM/UBS
* Dubai, benchmark deal expected; DB/HSBC/SCB
* Votorantim, $500m+ perp NC5 [talk 7.5%]; BAML/HSBC/Itau/MS; TBP later this week
* KTZ, benchmark 10-year; Barc/HSBC/RBS; TBP later this week
* Interbank, $400m 10-year; BAML/JPM
* BancoEstado, deal possible this week; DB/JPM
* BBVA Continental, $200m Tier 1 30NC10; CS/BBVA
* AWAS, $600m 6-year; GS/MS/DB
* Hyundai Cap Am, benchmark bond expected; Barc/Citi/HSBC/JPM
* Continental Trustees, $200m 30-year; CS/BBVA
* Lancer Fin, $275m 6-year rumored
* CBA, benchmark bond rumored; JPM