11:43 am - Slipping in Light Trade: The market continues to slump lower, concentrated on the longer maturities where the bulk of supply is working. Doubts about how the rescue/stimuli packages will work are still out there, but something is expected to get through. The ISM report was an upside surprise while the uncertainty of the refunding has passed, leaving the market vulnerable. Bloomberg reports the chart of the day offers an illustration of how taxpayers may be looking at $30B in losses on the Bear deal, with JPM footing $1.15B of the hhit. Cumberland Associates' Robert Eisenbeis says there is "no prospect" for profits. The chart shows losses since the June deal, via mark-to-market adjustments.
10:50 am - Sticking Lower: The supply announcement is out of the way, while smaller than expected, still at record levels. Treasury officials see the long road ahead for escalating borrowing is not as rocky as bond traders might expect, with Reuters reporting an assistant secretary saying "To date, our debt-to-GDP ratio is low [versus G7]...and we believe our capacity is quite high in terms of borrowing...If we can promote deep and liquid markets, we will continue to attract capital." The added supply is going to be competing against other sovereign and corporate offerings in what will likely be an increasingly risk friendly environment, and there is some concern that 2.9% for 10-yrs is just not enough, let alone 3.7% for 30.
10:15 am - Data Hit: The ISM services hit better than expected, with the headline at 42.9 for Jan after 40.1.The prices paid componant saw a sizable pop, but remains near the lowest since late 2001, at 42.5. The employment input hardly budged at 34.4 form 34.5. Bonds got hit, taking the 10-yr back to new month lows, to levels last seen at the start of Dec, with a little bit of a stumbling block at the 2.959% yield level. The curve has stretched well steeper, back t0 194.7 on the 2-10-yr yield spread, also flirting with early Dec points.
09:58 am - Back and Forth Buck: The buck has been giving back some on the euro and yen getting little off of the data and seeing a brief rally off of ADP, but the number was inline and is often dismissed even as they have altered their means of measure. The euro is suffering some on the Russia downgrade by Fitch while the upcoming ECB rate meeting, while offering no rate cuts will in likely indicate near-term trims on tap. The yen has been stuck in its still range bound state with a minor barrier at 88.80 with just under 90.00 a bit more substantial. The yen has been working better on the euro as well, while seeing some squaring pull through. The pound has managed to gain further ground across the board aiming for 1.4675. The dollar index has been back and forth, but leaning a little better at 85.61.
09:29 am - Supply Side: The market saw a fall off after swallowing the smaller than expected, albeit record high, refunding number. Traders had been expecting closer to $70B. Treasury will offer $32B 3-yrs, $21B 10-yrs and $14B 30s next week, they are also adding a monthly 7-yr offering and stepping up its 30-yr offering to 8 per yr adding reopenings. The market initially saw a rally but it was brief and the 10-yr backed off to new session lows. With that news out of the way trade will be refocused on the jobs worries with the ISM services due
08:43 am - Slipping Off: Trade is paring gains following the inline ADP guesstimate on payrolls, which puts things in range of what the market is looking for. Many think the number will be on the high end, well over economists' estimates, so an improvement over Dec would likely get a knee jerk, overdone selloff. The market is looking out to the ISM and supply announcement, with little expected on ISM and supply just a matter of size. The 10-yr may have trouble pushing through the 2.76% yield level if it gets another shot at the upside.
08:17 am - Bouncing into Open: ADP was poor, but about as expected, offering little new information. The market is getting boosted into the open as positions are squared and concerns over the jobs situation with a size bump in the Challenger jobs report along with a downgrade of Russia. Trade is being lead by the 5-to-30-yrs and
looking for continued bad showing on the data due over the next few sessions. The improvement in mortgage applications was driven by refinancing even as mortgage rates climbed and despite the Fed's efforts to keep a lid on rates. Bond rallies will be
tempered by supply concerns, and bumps should be limited. Markets are still dealing with tightened credit with Libor holding at higher levels and spread remain wider than the old norms. The ongoing job shedding across industries is helping to add to the negative expectations for Fri's payrolls. The curve has been flatter with the
2-10-yr yield spread at 191. The dollar is bid as it gets a safe haven bump on jobs taking the euro off to near Tues lows, ticking off to 1.2819 getting drag on the Russia downgrade. The yen is kicking around near 89.00 after a churn off to offer 89.70 per buck. Gold is slumming around near the week's lows with spot 896.34 (-4.01), while crude is seeing supply buying trading 41.35 (+0.57). The
ADP payrolls guesstimate hit at -522K versus expected -535K, still up
ISM services (10). Treasury will offer up its refunding announcement tomorrow (10)
07:36 am - Mortgage Applications: The MBA mortgage applications index bounced 8.6% after being slammed -38.8 last week with refis up 15.8% after a -48% and purchasing applications remained negative at -11.2% from -2.9%. The fixed 30-yr mortgage rate rose to 5.28% from to 5.22% while the 15-yr bounced up to 5.15% from 4.98% & 1-yr adjustable boosted to 6.09% from 5.95%
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