It may not be the most significant report on any given week, but there is usually a certain amount of cachet that comes with being Thursday AM's Jobless Claims report.  But when today's 30yr refunding is in town, some of that prestige is put on hold for more important things (such as the final vote of the week on the health of the long end of the yield curve).  And so it is that bond markets find themselves holding their ground despite a better than expected jobless claims print.  In fact it almost seems that the 830AM data release coincided with support in MBS.

More on Claims....

  • 502,000  (CONS. 510,000) FROM 514,000 PRIOR WK (PREV 512,000)
  • 4-WK AVG FELL TO 519,750  FROM 524,250 PRIOR (PREV. 523,750)
  • CONTINUED CLAIMS FELL TO 5.631 MLN  (CONS. 5.70) FROM 5.770 MLN PRIOR (PREV 5.749)
  • INSURED UNEMPLOYMENT RATE FELL TO 4.3 PCT FROM 4.4 PCT PRIOR WK (PREV 4.4)
  • 4-WK AVERAGE LOWEST SINCE MATCHING 519,750 IN WK ENDED NOV 29, 2008
  • HEADLINE CLAIMS LOWEST SINCE 488,000 IN WK ENDED JAN 3

Normally, that would elicit a slightly more bearish move than bonds have experienced so far...  Zooming out to a weekly view shows us the AM's movements have, in many ways, merely constituted a return to some semblance of a range boundary ahead of the more important 30yr bond auction.

Underscoring the importance of the 30yr bond auction results, which we'll get at 1pm, is the general reduction of volume leading up to it.  Indeed we saw far less volume than normal on 3 and 10 year auctions. This could easily be a factor of the holiday-punctuated trading week to some extent, but that doesn't matter too much in the sense that we are where we are: waiting for auction results.  Whether we're waiting to be informed on sentiment toward the long end of the curve, or for some other reason, it's the most important part of the rest of the day (and perhaps the entire week).

Here's a look at the steady decrease in volume...

By the numbers:

  • 4.5's are up a tick to 101-06
  • 10's are at roughly the same levels as Tuesday's close at 3.47...  (that number seems familiar for some other reason too...ha!)
  • with 2's at .827, that puts the yield curve at 265bps.. (2s10s)
  • That leaves enough room for a lackluster auction to widen things out more toward all time wides fo 275bps, but let's not start making doomsday prophecies until the sky actually turns red shall we?!
  • conversely, 265 is wide enough that it could act like "potential energy" that's been saved up in a taut rubber band.

As always, we'll have pertinent play by play of post auction movements.  Stay Tuned