The Day Ahead: Weaker Bonds Buoyed by Claims, More Data Ahead
Here was where the market stood just before the 830am release of weekly Jobless Claims
MBS Open Much Weaker Despite Uneventful Overnight Session 8:29AM
Nothing much transpired overnight, at least relative to the glut of data and headlines out of Europe (and sometimes Asia) to which we've grown accustomed. Bond markets' biggest detractor appears to be much-stronger-than-expected French and Spanish auctions. We could be seeing a number of other things here ranging from "discounting economic data" for the last two days of the week" or even a more tactical trade (short term, "trader's paradise kinda stuff) on the expectation that the boiling-point reached in the EU will soon result in some sort of temporary pressure relief. We should also probably not overlook the fact that it's now 12/1/11, and if we're always on about "month-end-buying" being a supportive event for bond markets, then perhaps we're also experiencing a bit of unwind to that phenomenon.
Any way you slice it, bond markets are weak and getting weaker before the 830am data. 10yr yields are up 6 bps to 2.133 and Fannie 3.5's are down 12 ticks to 101-18. Jobless Claims is the sole release at 830am and then we're waiting until 10am for the Construction Spending and ISM Manufacturing.
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Then the following wires crossed on Claims data:
RTRS - US JOBLESS CLAIMS ROSE TO 402,000 NOV 26 WEEK (CONSENSUS 390,000) FROM 396,000 PRIOR WEEK (PREVIOUS 393,000)
RTRS - US JOBLESS CLAIMS 4-WK AVG ROSE TO 395,750 NOV 26 WEEK FROM 395,250 PRIOR WEEK (PREVIOUS 394,250)
RTRS - US CONTINUED CLAIMS ROSE TO 3.740 MLN (CON. 3.650 MLN) NOV 19 WEEK FROM 3.705 MLN PRIOR WEEK (PREV 3.691 MLN)
RTRS - US JOBLESS CLAIMS HIGHEST SINCE WEEK ENDED OCT 22 (406,000)
and bond markets bounced back. Here's a video clip of the action about 10 minutes after the release from the MBS Live Dashboard:
Remaining Economic Data:
- 1000 AM - ISM Manufacturing Index - previous: 50.8 / forecast: 51.5
- 1000 AM - Construction Spending - previous: + 0.2% / forecast: +0.3%
Lastly this morning, here's a variation of a chart that we've been posting for quite some time, hourly treasury candlesticks, that has shown positive, negative, and sideways trends depending on which one(s) we are highlighting at the time. The following version introduces the new possibility of an uptrend in 10yr yields, one that could remain intact on a strong NFP print tomorrow.
As of right now, yields are right on the teal line, and of course, a big miss or beat on the NFP can completely alter the technical landscape (EU headlines of sufficient magnitutde could easily do the same of course), but if we we close over the teal line today and are trading over it tomorrow morning, it would be more edification for this uptrend. On the other side of the coin, we can keep an eye on the lower grey line, hoping that it breaks so that benchmark 10's can stay within the 1.95-2.07 range that MBS have been so well enjoying (yes, we're over 2.07 right now, I know... technically "testing" a breakout of the 2.07 range today).