Good Morning. Today is the NHL trade deadline. My CAPS need a stellar blue-liner to boost cup hopes. Come on McPhee...make a move!

At 735, this hit news wires:

Basically the Greeks need to show EU officials some legitimate progress on budget reform before emergency funding is granted. Greece's austerity plan will raise 4.4 billion Euros ($6.5 billion) via cuts and new taxes including a gaming tax, a fuel tax, special taxes on luxury goods, and a CHURCH tax (haha seriously?). The main idea is to increase credibility so they can raise some money and get creditors off their back. Germany says they are not planning on offering aid until austerity measures are implemented. This isn't really funny but its kinda funny. I wish this would go away so we can stop talking about "what ifs" and " if thens". The market is not convinced of anything just yet, the Euro took a shot after the news printed.


Weakness in the EURO reflects broader concerns about the health of the entire EU. Oh well...US bond markets are benefiting from US dollar strength vs. the Euro. We'll take it for now and hope the media doesn't catch wind of how frail California's fiscal situation is....the last thing we want it more nonsense about a US credit rating downgrade.

We got a preview of Friday's NFP data this AM via Challenger Planned Layoffs and the ADP Employment Report.

CHALLENGER JOBS REPORT: Planned Job Cuts Fall 41% to 42,090 in February from 71,482 in January. Lowest number of planned cuts since July 2006 when 37,178 planned cuts were announced.  John  Challenger, CEO of Challenger, Gray & Christmas says: "It may be a couple of more months before hiring begins to surge, but it is clear that employers have shifted away from downsizing and are poised to start adding workers" 

ADP EMPLOYMENT REPORT: -20,000 Jobs in February vs. -60k in January (revised from -22k). Consensus estimate was -20k. On the screws. The revision to January data was not pretty but February wasn't bad.

Notice what sector of the labor market that is dragging down the data: SMALL, GOODS PRODUCING BUSINESSES.  Small business owners make up the majority of labor demand in the US. Small businesses must be able to access credit so they can utilize any liquidity to expand hiring. This is an essential part of the recovery process. Jobs put money in people's pockets, money that is eventually redistributed around the economy. There is a clog in the distribution of wealth!


The text of the ADP release did note that the weather did not have much effect on the data:

"Two large blizzards smothered parts of the east coast during the reference period for the BLS establishment survey. The adverse weather had only a very small effect on today’s ADP Report due to the methodology used to construct it. However, the adverse weather is widely expected to depress the BLS estimate of the monthly change in employment for February, but boost it for March. Therefore, it would not be unreasonable to expect the BLS estimate for February (due out this Friday) to be less than today’s ADP Report even though the BLS estimate will include the hiring of temporary Census workers not captured in the ADP Report."

Plain and Simple: the largest snow storms hit  on the weekend of February 6 and then again on February 9. This was the week  the official employment survey was conducted.  Everything in DC and MD and eastern PA was closed as folks were unable to leave their homes.  Because the official employment survey was conducted during this week, the official Employment Situation Report is expected to be affected negatively.  Reuters consensus calls for 50,000 jobs losses. Whisper numbers call for 100,000 cuts.

We've been speculating about the sources of strength behind bullish bond market momentum. On one hand we know the market is nervous about Friday's NFP print, hence a pre-data release flight to safety makes sense. However, considering how technical price action has been lately, we also recognize the influence of underlying real money buying and the rallying dollar as a reason for rates rallies. In the end, the reaction to ADP data should provide some feedback on that perspective.

Benchmark TSYs did react but participation in the sell off wasn't convincing. Volume was not indicative a broad shift in sentiment as the overnight range lows were broken.

Looking at cash market 10s, the knee jerk reaction pushed yields right back to my favorite pivot point: the 62% retracement of the Dec.21 sell off. My bet is that traders keep yields near this level leading up to the 830am NFP release on Friday morning.

The 3.625% coupon bearing 10 year TSY note is -0-06 at 99-30. 10s are battling PARNERTIA....

"Rate sheet influential" MBS coupons continue to play follow the leader as many accounts are on the sidelines, weathering the buyout storm and trying to make sense of the Fed's exit. "Up in Coupon"  was however on fire yesterday after FN updated traders on the timing of delinquency buyouts.

The FN 4.0 is -0-03 at 98-04 yielding 4.18% and the FN 4.5 is -0-03 at 100-31 yielding 4.394%. The secondary market current coupon is 4.319%. By my scorecard the CC yield is +68.7bps over the 10yr note yield and +63.5bps over the 10yr swap. Spreads slightly tighter vs. TSYs and swaps.

We are well off the highs of the day and looking to test range support at 3.66%. We should get a better idea today on how much weight is being placed on NFP whispers, in the absence of a clear bias we continue to point toward the techs for guidance. 3.64% is my target in 10s. 100-28 for FN 4.5s.

Wells already released pricing, they may reprice for the worse. Other lenders will delay pricing. Rate sheets will be worse this morning.