First Asia, then Europe, and now the Domestic session... All three have had moderately positive impacts on bond markets leaving Fannie 3.5 MBS up 10 ticks at 103-16 and 10yr yields down nearly 7bps at 1.988. Stocks were already down in the overnight session on weaker Chinese GDP and Spanish debt concerns, but losses accelerated after a weaker-than-expected Consumer Sentiment report showed consumers' assessment of current conditions stood at the lowest level since December 2011. With bond markets recently at the weaker end of their range there has been "room to run" to some extent, but current gains are already rapidly approaching the week's best levels. Resistance to further gains could be a problem once we reach those levels, but holding flat at current levels would be just fine with us.
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Pricing as of 11:06 AM EST
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ECON: Consumer Sentiment Slightly Lower Than Expected
The week's last piece of scheduled economic data--Consumer Sentiment--is out with a slightly weaker than expected headline of 75.7 vs a consensus of 76.2 (also March's final reading). Stocks are taking the news hard though we haven't seen quite as much "equal and opposite reaction" in bond markets.
One of the more noticeable divergences from estimates was in the "Current Conditions" component which showed a drop from 86.0 in March to 80.6 today, the lowest since December. But fast forward 12 months, and consumer expectations improved from 79 to 87 on the "12-month outlook," the highest since September 2009.
Inflation expectations were flat for the 5yr component and significantly lower (3.4 vs 3.9) for the 1 year component. This likely represents Consumers' expectations that gas prices "can't stay this high forever..."
MBS, Treasuries Open Stronger, Off Best Levels in First Hour
Bond markets are trading in positive territory this morning despite some choppiness in the first hour of domestic trade. The overnight session began with weaker than expected GDP out of China sending S&P futures and 10yr yields appreciably lower (relative to a fairly narrow recent range) in more volume than we tend to see during Asian trading hours. European hours helped add on to the gains after markets learned Spain's ECB borrowing hit record levels in March.
This morning's key domestic data, Consumer Prices, were of little consequence as they printed exactly as expected. The movement since then has been relatively small compared to overnight fluctuations.
Stocks and Treasuries have been well-connected since the China GDP data and MBS are basically along for the ride. Fannie 3.5's are up 6 ticks at 103-12 and 10yr TSYs down 4 bps to 2.016. The next domestic economic data hits at 9:55am with Consumer Sentiment.
ECON: Consumer Prices In Line With Expectations
The Consumer Price Index for All Urban Consumers (CPI-U) increased
0.3 percent in March on a seasonally adjusted basis, the U.S. Bureau
of Labor Statistics reported today. Over the last 12 months, the all
items index increased 2.7 percent before seasonal adjustment.
The indexes for food, energy, and all items less food and energy all
increased in March. The gasoline index continued to rise, more than
offsetting a decline in the household energy index and leading to a
0.9 percent increase in the energy index. The food index rose 0.2
percent as the index for meats, poultry, fish, and eggs increased
The index for all items less food and energy rose 0.2 percent in
March after increasing 0.1 percent in February. Most of the major
components increased in March, with the indexes for shelter and used
cars and trucks accounting for about half the total increase for all
items less food and energy. The indexes for medical care, apparel,
recreation, new vehicles, and airline fares increased as well, while
the indexes for tobacco and household furnishings and operations were
among the few to decline in March.
The all items index has risen 2.7 percent over the last 12 months, a
decline from last month's 2.9 percent figure. The energy index has
risen 4.6 percent and the food index has increased 3.3 percent; both
increases are smaller than last month. In contrast, the 12-month
change in the index for all items less food and energy, which was 2.2
percent last month, edged up to 2.3 percent in March.
Live Chat Featured Comments
Brent Borcherding : "It's gonna be a good day."
Matthew Graham : "- THOMSON REUTERS/U. OF MICH CONSUMER CONSUMER EXPECTATIONS INDEX AT HIGHEST SINCE SEPT 2009"
Matthew Graham : "- THOMSON REUTERS/U. OF MICH 12-MONTH ECONOMIC OUTLOOK INDEX PRELIMINARY APRIL 87 VS FINAL MARCH 79"
Matthew Graham : " - THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX PRELIMINARY APRIL 80.6 (CONSENSUS 86.1) VS FINAL MARCH 86.0 "
Matthew Graham : "- THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT PRELIMINARY APRIL 75.7 (CONSENSUS 76.2) VS FINAL MARCH 76.2 "
Matthew Graham : "I don't know if I'm ready to say "range trade between 1.96 and 2.07 in 10yr yields until then, but that's what we got this week and I probably would have hesitated to call the range that narrow last Friday as well!"
Victor Burek : "sentiment lower"
Matthew Graham : "Retail Sales always deserves some attention. The rest of the week is fairly slow, and with FOMC the following week, there could be some hesitation to move too far in either direction"
Alan Craft : "Hey MG. I was checking tomorrow's econ calendar. Any potential major movers there?"
Victor Burek : "back under 2.00"
Matthew Graham : "Stocks weaker at the open, futures down a quick 4 points. Bond markets maybe seeing a slight benefit, though it's clear 10's/MBS don't want to chase stocks' pace completely "
Christopher Stevens : "nice week for rates"
Matthew Graham : "slightly bearish statement for stocks/consumer spending there"
Matthew Graham : "RTRS - U.S. MARCH REAL EARNINGS ALL PRIVATE WORKERS -0.4 PCT (CONS -0.1 PCT) VS FEB +0.1 PCT (PREV -0.3 PCT) "
Matthew Graham : "RTRS - U.S. MARCH CPI YEAR-OVER-YEAR +2.7 PCT (CONS +2.7 PCT), EXFOOD/ENERGY +2.3 PCT (CONS +2.2 PCT) "
Matthew Graham : "on the screws"
Matthew Graham : "RTRS- U.S. MARCH CPI +0.3 PCT (+0.2911; CONSENSUS +0.3 PCT), EXFOOD/ENERGY +0.2 PCT (+0.2304; CONS +0.2 PCT) "