May 9th, 2011 7:45 AM by Lehel S.
Treasuries and mortgages opened soft early this morning but by 9:00 were recovering with only minor price declines. No scheduled data today; most attention focused on the dollar and continuing concerns over Greece's debt. There was no additional news from the ECB or Greece over the weekend however. Last week the euro fell the most in a week since back in 2008 with concerns Greece would not be able to survive in the EU, this morning the dollar is slightly weaker against the currency. A weakening dollar continues to support US bond markets.
Crude oil fell almost $17.00, gold dropped $65.00, all commodities declined last week as most of the markets had become way to frothy leading the exchanges to increase margin rates. This morning crude started up over $2.00 but since has backed of a little, volatility in crude should be expected this week, the same with gold and silver and the rate markets. The economic outlook is being adjusted lower taking any concerns about inflation off the table. Some pundits beginning to talk about anther easing move from the Fed as the economic outlook deteriorated last week. Although the April employment report headlines were much better than thought (non-farm private jobs up 268K), markets generally ignored it; Friday no change in rates and only an anemic close for equity markets.
Treasury will conduct its quarterly refunding beginning tomorrow, auctioning $72B of 3 yr, 10 yr and 30 yr notes and bonds. We expect good demand for all three auctions with global economic outlooks softening and inflation fears that come and go are now less threatening.
This Week's Economic Calendar:
8:30 am April export and import prices (N/A)
10:00 am Mar wholesale inventories (+1.0%)
1:00 pm $32B 3 yr note auction
7:00 am Weekly MBA mortgage applications
8:30 am Mar Trade balance (-$47.7B)
1:00 pm $24B 10 yr note auction
8:30 am weekly jobless claims (-51K to 423K; con't claims 3.70 mil frm 3.733 mil last week)
April PPI (+0.5%; ex food and energy +0.2%)
April retail sales (+0.6%; ex auto sales +0.5%)
10:00 am Mar business inventories (+0.9%)
1:00 pm $16B 30 yr bond auction
8:30 am April CPI (+0.4%, ex food and energy +0.1%)
9:55 am U. of Michigan consumer sentiment index (69.5 frm 69.8)
The DJIA opened at 9:30 +14, mortgage prices -1/32 (.03 bp).
Technicals in the bond and mortgage markets remain overbought, possibly some pullback and consolidation here but the markets are quite bullish presently, as long as that continues not much retreat in the bond market. This week will likely be marked with increased market volatility.