The Day Ahead: Jobless Claims, Productivity, Auction Announcement
Benchmark Treasuries begin the U.S. session slightly worse than yesterday's best levels after weak econ data pushed the 10-year Treasury yield down 11 basis points to 2.939% while equity markets shed more than 2%.
The benchmark 10-year Treasury yield remains below the 3% mark at 2.96% in early trading, versus 2.939% at the previous close. Wednesday marked the first time the yield had dipped below the 3% mark since December. The two-year note remains at 0.437% and the 30-year yield is three basis points softer at 4.173%.
Bond Market Repeating History. False Start Fuels Rally
Mortgages performed well yesterday, keeping up with Treasuries and even outperforming in some cases thanks to a lack of loan supply and steady buyer demand. Reprices for the better were reported. Loan pricing hasn't been this aggressive since late November 2010. Loan pricing does however look to weaken a bit this morning as TBAs are backing up a few ticks. The FNCL 4.0 is currently -3/32 at 101-06.
S&P 500 futures are 2.00 points higher at 1,314. That compares with a 31 point drop Wednesday - the worst single day since last August. Dow futures are 6 points up at 12,283, versus a 280 points descent on Wednesday.
Global equities have been bathed in red following the U.S. sell-off. Markets in Asia fell between 1.40% and 1.70%, and the ongoing session is in Europe is about as bad: France's CAC-40 is down 1.12% and London's FTSE 100 is off 0.75%.
"Global equities are on shaky ground this morning following yesterday's steep declines in North America after the weak ADP print spooked investors and put into question the strength of the U.S. economy," said economists at BMO Capital Markets. "Despite a downgrade to Greece's credit rating by Moody's - three notches lower to Caa1 - late Wednesday, taking it deep into junk territory, the EUR is bouncing back this morning following strong demand at a Spanish bond auction."
Commodity prices are relatively flat. Light crude oil rose 0.12% overnight to $100.42 per barrel, and gold prices rose 0.10% to $1,544.70 per ounce.
Key Events Today:
8:30 - Initial Jobless Claims have surprised analysts by keeping above the 400k mark for the past seven consecutive weeks, and the most recent trends haven't been encouraging. Last week's report showed 424k new claims for unemployment insurance from 414k the week before; this week the estimate is 420k, with forecasts ranging from 410k to 440k.
"Nonstop extreme weather will likely keep claims elevated for yet another week," said economists at Nomura. "We continue to have confidence in a gradual labor market recovery, but doubt that claims will drop below 400k in the coming weeks."
8:30 - Not much is expected from the revised Productivity & Costs report for the first-quarter. As GDP was left unchanged in recent revisions, there's little to look out for. Productivity should remain at +1.6% or perhaps tick up to +1.7%, while unit labor costs should keep near its +0.8% gain.
"Because the first quarter GDP revision was so small and compensation was not altered, we do not look for much change in productivity and costs," said economists at Citigroup. "Nonfarm productivity likely will be revised up slightly and unit labor costs will move in the opposing direction. Markets are unlikely to take note of these small changes."
11:00 - Treasury announces the terms of 3-year, 10-year, and 30-year debt supply to be auctioned next week.