The AM So Far...

  • ADP worse than expected at -254k
  • GDP Better than expected at -.7 vs. consensus of -1.2

    •  deflator unch (cons unch), prev unch

    • pce price index +1.4 pct (cons +1.3), prev +1.3; core pce +2.0 pct (cons +2.0), prev +2.0

    • consumer spending -0.9 pct (prev -1.0), durables -5.6 pct (prev -5.8)

    • market-based pce price index +1.5 pct (prev +1.5), core +2.3 pct (prev +2.3)

    • business investment -9.6 pct (prev -10.9 pct), equipment/software -4.9 pct (prev -8.4 pct)

    • home investment -23.3 pct (prev -22.8 pct),bus. investment in structures -17.3 pct(prev -15.1)

    • exports -4.1 pct (prev -5.0 pct), imports -14.7 pct (prev -15.1 pct)

    • gdp ex motor vehicles -0.9 pct (prev -1.2 pct)

    • year-on-year pce price index -0.2 pct (prev -0.2 pct), core pce +1.6 pct (prev +1.6 pct)

    • business inventory change record -$160.2 bln (prev -$159.2 bln)

  • Bonds Initial reaction DOWN, 10 yr yields up, but have found resistance in both MBS and tsy's at better levels than yesterdays low range. 
  • So far so good.

Take a look at the next chart below.  I wanted you to see that the range we're looking at above is fairly narrow compared to the slightly bigger picture.  In this context, even if we were to encounter more weakness today, it would have to be much worse than I think the data would bear in order to shift any importance off the week's remaining events...

On a final note, here is the most conclusive evidence for support of the bounce this AM.  Notice the volume spike yesterday supporting tsy futures at 118-03...  Notice this AM's most significant volume spike suggests the same level.  It's common to see these spikes follow each other in an "established then supported" pattern.  Bottom line, yesterday AM's volume established and this AM's volume rose to defend the moment prices threatened a downside breakthrough.  Additional technical price cues offered near the 118 level as well, mostly psychological though.  Ridiculous support at 117-26.

"bottomest" line: NFP, quarter/month end, prepays for MBS, etc...  all still as important as they were last night.  Whether it's borne out today or by week's end, today's GDP is worthy of a blip only.

MBS, Tsy, and LIBOR Quotes.