Bond Ticker - Bonds Center. Treasuries Slide as Risk Assets Rally. U. S. Treasuries lost ground today in a curve- steepening trade as global equity markets rallied in concert with Deutsche Bank shares. The beleaguered German lender rallied today as a rumor spread that the bank will settle with the Department of Justice for EUR5. The weaker spending data helped weigh on the Atlanta Fed's GDPNow model forecast for Q3 GDP growth, which now stands at 2. The S& P 5. 00 is up 1. U. S. Dollar Index is down 0. Yield Check: 2- yr: +3 bps to 0. News: U. S. Personal income was up 0. July. Personal spending was unchanged m/m in August, missing the Briefing. July's growth was revised up to 0. Core PCE (personal consumption expenditure) Prices were up 0. Briefing. com consensus. July's change was +0. The Chicago Purchasing Managers' Index jumped to 5. September from 5. August, beating the Briefing. Michigan Sentiment for September was finalized at 9. The Briefing. com consensus was for a smaller revision to 9. Current Conditions were revised up to 1. Consumer Expectations were revised up to 8. The Atlanta Fed's GDPNow model forecast for U. S. Q3 GDP growth fell to 2. Wednesday on the personal spending disappointment and a lower forecast for inventory investment.
Dallas Fed President Robert Kaplan said today that he sees no evidence that the U. S. He said that structural headwinds like demographics will limit growth and inflation. The Dallas Fed president will vote in 2. Commodities: WTI crude: +0. Gold: - 0. 4. 9% to $1,3. Copper: +1. 1. 0% to $2. Currencies: EUR/USD: +0. USD/JPY: +0. 2. 2% to 1. Week Ahead: Monday: September ISM Manufacturing (1. ET); August Construction Spending (1. ET); September Auto and Truck Sales (1. ET)Tuesday: Richmond Fed President Lacker (non- FOMC voter) (0. ET); Chicago Fed President Evans (non- FOMC voter) (1. ET)Wednesday: MBA Mortgage Index for the week ending 1. ET); September ADP Employment Change (0. ET); August Trade Balance (0. ET); Minneapolis Fed President Kashkari (non- FOMC voter); August Factory Orders (1. ET); September ISM Services (1. ET); Crude Inventories for the week ending 1. ET); Richmond Fed President Lacker (non- FOMC voter) (1. Analysis of Corporate Bond Liquidity. FAIRHOLME CAPITAL MANAGEMENT, L.L.C. ET, 1. 7: 0. 0 ET) Thursday: September Challenger Job Cuts (0. ET); Initial Jobless Claims for the week ending 1. Continuing Jobless Claims for the week ending 9/2. ET); Natural Gas Inventories for the week ending 1. ET)Friday: September Employment Situation Report (0. ET); August Wholesale Inventories (1. ET); Fed Vice Chair Fischer (FOMC voter) (1. ET); Cleveland Fed President Mester (FOMC voter); August Consumer Credit (1. ET); Kansas City Fed President George (FOMC voter) (1. ET); Fed Governor Brainard (FOMC voter) (1. ET)2: 4. 3 pm - Euro Reverses Early Losses as Deutsche Bank Shares Bounce Sharply. The U. S. Dollar Index fell 0. Deutsche Bank will settle with the U. S. Department of Justice for $5. Overnight, economic data releases for Japan were categorically disappointing from household spending to consumer price indices to housing starts. In the eurozone, French consumer spending beat analyst estimates but the eurozone's core consumer price inflation ran cooler than expected. Canadian GDP growth beat estimates for July. China's renminbi will constitute 1. IMF's special drawing rights (SDRs) as of October 1. EUR/USD: +0. 1. 1% to 1. The eurozone's core CPI grew 0. September, just short of expectations and in line with August's growth rate. The eurozone's unemployment rate remained at 1. August, missing forecasts for a decline. German retail sales fell 0. August, missing estimates and reversing July's 0. French consumer spending grew by a better- than- expected 0. August after falling 0. July. GBP/USD: +0. The U. K.'s GDP growth for Q2 was finalized at 0. That was better than the prior estimate of 0. The U. K.'s Nationwide House Price Index was up 0. September, in line with expectations but short of August's 0. USD/CHF: +0. 5. 1% to 0. In Switzerland, KOF Leading Indicators rose more than expected to 1. September from 9. August. USD/JPY: +0. In Japan, household spending fell 3. August (- 4. 6% y/y), missing estimates and reversing July's 2. Industrial production grew by 1. August, beating expectations and reversing July's 0. The National Core CPI fell 0. September, just below estimates and in line with August's deflation rate. The National CPI (headline) fell 0. September, continuing August's pace of decline. Japan's unemployment rate unexpectedly ticked up to 3. August from 3. 0% in July. Housing starts rose 2. August, much lower than both forecasts and July's 8. USD/CNY: +0. 0. 6% to 6. In China, the Caixin Manufacturing Purchasing Managers' Index ticked up to 5. September from 5. August, as expected. USD/CAD: - 0. 1. 4% to 1. Canada's GDP grew by 0. July, beating forecasts but slowing from June's 0. The Raw Materials Price Index fell 0. August, less than expected and less than July's 2. AUD/USD: +0. 4. 3% to 0. In Australia, HIA New Home Sales rose 6. September, reversing some of August 9. Private sector credit rose 0. August, in line with July's growth rate but short of economists' forecasts. NZD/USD: +0. 5. 0% to 0. In New Zealand, the ANZ Business Confidence index jumped to a better- than- expected 2. September from 1. August. Building consents fell by a smaller- than- expected 1. August after dropping 8. July. 1: 3. 6 pm - Yield Curve Remains Steeper. Losses in the Treasury market are deepening somewhat this afternoon as some of the maturities have moved back to test their highs from last week (resistance- becomes- support kind of thing). We continue to see the 1. Treasury as vulnerable to deeper losses above its 5. U. S. The S& P 5. U. S. Dollar has moved up from its session low (9. WTI crude is up 0. The FT says that Deutsche has EUR2. EUR1. 0. 9 bln of liabilities) but this theory is hotly debated among the analyst community. Bloomberg runs a piece this afternoon about the divergence between Goldman and Morgan Stanley on the future 1. Morgan Stanley is calling for the 1. Treasury yield to fall to 1. Yield Check: 2- yr: +2 bps to 0. New IMF SDR (special drawing rights) weightings: USD 4. EUR 3. 0. 9. 3% (prev 3. RMB 1. 0. 9. 2% (prev 0%). JPY 8. 3. 3% (prev 9. GBP 8. 0. 9% (prev 1. Deutsche Bank Relief Weighs on Treasuries. U. S. Treasuries continue to lose ground this afternoon as Deutsche Bank worries have evaporated in the past six hours. The rumor is that the German lender will settle with the U. S. Department of Justice for $5. While this hardly eliminates Deutsche's issues with flatter yield curves in the eurozone and sluggish economic growth, it would give the bank plenty of time to deal with those problems and wait for the return of higher interest rates. While banks like Bear Stearns and Lehman Brothers were dependent on wholesale funding markets to remain solvent, Deutsche has a large depositor base. Deposits are a much more stable form of capital than commercial paper and things like that. Recalling this fact would have been much more useful early this morning, but there you have it. The S& P 5. 00 is now up 0. U. S. Dollar Index is down 0. WTI crude is up 0. WTI was trading on the $4. Gold is down 0. 3. The probability of one or more hikes by year- end is 6. The Chinese renminbi will join the IMF's currency basket called special drawing rights (SDRs) on October 1. The current members are the dollar, euro, pound, and yen. The inclusion is expected to cause few ripples in FX markets but it is a development to watch nonetheless. USD/CNY is up 0. 1. Yield Check: 2- yr: +2 bps to 0. Stocks Hold Gains, Test Technical Resistance. The risk- on trade is now in fourth gear this morning as rumors that the Department of Justice will settle with Deutsche Bank for a $5. RMBS (residential mortgage- backed securities) litigation are assuaging market fears that the German lender would have had to pay something near the headline figure of $1. The Treasury market is sliding as investors pile into riskier assets and the yield curve is steepening. Dollar Index is down 0. Deutsche Bank ADRs are up 1. The S& P 5. 00 again fights against its 5. The index currently trades up 0. A U. K. Traders are attributing a massive decline today in the 2. The nominal 5. 0- year gilt yield is up 7 basis points to 1. Here is more on the stress in money markets ahead of the looming October 1. Yield Check: 2- yr: +2 bps to 0. Tensions Around Deutsche Bank Cool: The Dollar Index rallied in overnight trade as a safe haven play but has given up those gains as tensions cooled surrounding Deutsche Bank. The DXY was able to rally to 9. It would reverse course and see the selling accelerate as Personal Income & Spending and PCE Prices generally came in line with expectations. A Chicago PMI beat and an upward revision to Michigan Sentiment finished off the week on a positive note. At the end of the day though the dollar remains in its recent tight trading range. The euro is seeing a bid as risk on regains some form. The euro has been a good proxy for measuring risk as a rallying euro generally points to markets looking to add risk and vice versa. But similar to the dollar it remains in a tight range. The pound continues to float below the 1. It has been unable to break above but it has been able to remain in striking distance. The Current Account deficit came in higher than expected reflecting some of the impact from the weaker cable. There was also a slightly downward revision in the Final Q2 GDP read as it was trimmed to +2. The yen has seen some selling in response to the risk on trade. The yen/euro relationship is arguably the best tell for the tone of the market these days. Yen has dipped back into the 1. It was a busy day of data in Japan with CPI, Household Spending, and Housing Starts all falling short of expectations. The Mexican peso continues to regain some of its recent losses. The peso was bolstered by the Mexico central bank which hiked rates 5. U. S. The S& P 5. Treasuries are predictably dropping. As mentioned in earlier comments, we need to see the 1. Dollar Index is down 0.
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