Both benchmark interest rates and equity futures are weaker ahead of manufacturing data this morning,  which is expected to report a slowdown at regional and national levels. 

Ninety minutes before the opening bell, S&P 500 futures are down 3.25 points to 1,112.50 and the 10 year Treasury note is -13/32 at 99-05 yielding 2.724% (+4.4bps). The November delivery FNCL 4.0 is -9/32 at 102-09. Yield spreads are slightly tighter on a nominal basis.

The US dollar is stronger this morning after the Bank of Japan intervened in the currency market for the first time in six years. The yen had been trading at a 15-year high against the dollar, prompting the move, which caused the yen to fall 2.7%.

“After four months of almost uninterrupted strength in the Japanese yen, the Bank of Japan, directed by the government, unilaterally intervened in foreign exchange markets to weaken the currency,” economists at BMO Capital Markets wrote this morning. 

The economists believed the intervention wouldn’t have much impact in the long-term.

“Clearly the intervention was effective in the short-term, however, unilateral intervention doesn’t have a track record of success. Without assistance from the Fed and ECB, it’s unlikely the BoJ will be able to do much more than keep the yen from appreciating further. After markets shake off the initial shock of the intervention, don’t be surprised to see the yen retest recent 15-year highs.”

Key Events Today:

7:00 ― MBA Mortgage Applications, just released, fell 8.9% in the week ending Sept. 10, even as the average rate for a 30-year mortgage decreased three basis points to 4.47%.

Refinancings were down 10.8% and purchases declined 0.4% in the seasonally-adjusted indexes.

8:30 ― The Empire State Manufacturing Survey, the first regional index to be released each month, is expected to slow down in August from 7.1 to 5.0, according to economists polled by Reuters. The index has been quickly heading toward zero for the last several months ― in April, the index peaked at +32. New orders, a key component in the index which best projects future headlines, declined to a contracting score last month. Production weakened too. 

Economists at BMO predict the index will rise to 9.0, but even that would be a disappointment versus the average of 22 in the first half of the year, they noted. “Keep an eye on the new orders component, as a second straight decline would be a bad omen for future production.”

9:15 ― Industrial Production, another key index this week, is expected to inch up 0.2% in August following a much larger 1% gain in July. Production has generally been rising since June 2009 but recent indexes from the around the country have been soft. The ISM manufacturing index suggests estimates might be a bit low, however; it

climbed to 56.3 in August, indicating fairly robust growth (anything above 50 indicates growth.) 

Economists at IHS Global Insight said industrial production should be weak following July’s spike in motor vehicle production. “Utility output is likely to decline also, from an unusually high level, but ex-autos manufacturing should continue to advance,” they wrote.

9:30 ― The House Financial Services Committee will hold a hearing on "The Future of Housing Finance: A Progress Update on the GSEs". Witnesses include Michael S. Barr, Assistant Secretary for Financial Institutions, U.S. Department of the Treasury and Edward J. DeMarco, Acting Director, Federal Housing Finance Agency