The Day Ahead: Economic Data Ramps Up; Europe Still The Focus

Wednesday was quite a day for bond markets--a record-setting day on many fronts.  While we can appreciate that there are some claims that 10yr Yields have been lower (like this one) and other long term charts that tell a different story (like this one), we're more than content thinking and saying that 10yr yields hit an all time low yesterday.  Not only that, but they crushed the previous low of 1.674, moving down to 1.61.  Some folks have been entertaining the possibility of things moving lower, potentially hitting a 1.5% milestone.  Articles and video clips on WSJ, Bloomberg, CNBC, etc. have been making the rounds for the past 2 weeks re: 1.5%, but of course, THESE possibilities are nothing new.

MBS eked out some record levels as well, but the victory was rather lackluster compared to our big brother Treasuries.  When all was said and done, Fannie 3.5's notched up to 104-26+ vs a previous high of 104-24+.  Bid yields dropped 0.0105% from a previous record low of 2.9462 2.9357% while Treasuries fell 6 times further (change in 10yr record divided by change in MBS record =  6.095x).

No one knows whether or not things will continue heading in the prevailing direction, so we watch and wait.  Europe continues to dominate in that regard.  More simply: that's what we're watching first as the European situation has so overwhelmingly dominated the race to determine what's moving markets.  That's frustrating because, frankly, it's not nearly as easy to dissect European events and extrapolate their market moving suggestions as it is to look at good old-fashioned domestic economic data 'meeting, beating, or missing' and deduce a logical and linear movement based on the size of the deviation from expectations and the overall importance of the report.

But even though we give Europe the right of way, domestic economic data increases its presence on the road today (like a bicyclist in a tractor trailer's blind spot perhaps?).  Due to the shortened week, we'll get ADP employment this morning as opposed to it's normal Wednesday release.  It's preceded by the less important Challenger Layoffs report and followed by Jobless Claims, Preliminary GDP for Q1 and Corporate Profits all at 8:30am.  Chicago PMI waltzes in at a "time to go home yet?" 9:45am, but still matters in the same way most of the domestic data matters: in the sense that it accompanies the preeminent member of its cohort: Friday's NFP, collectively creating the possibility of shifting sentiments in the June FOMC Announcement.