After an extremely quiet overnight session, domestic bond markets are beginning the day in generally the same territory as yesterday's close. Fannie 3.5's are unchanged, as are 10yr yields. Stock futures are within a point of their 4pm levels from yesterday as well. We rarely see all 3 of these markets pull this off, and on such occasions, there's a chance that the 3 instances of "unchanged" are merely serendipitous stopping points after a choppy overnight session.
Last night was anything but choppy. 10's stayed in a range of 1.96 to 1.99 and S&P futures never moved more than 5 pts in either direction from current levels. To top it all off, volume was quite light.
The quietness isn't for lack of news and data. Some highlights:
- German Cabinet agreed to re-up their "Soffin" bank rescue fund
- EU Industrial Output is +1.3% year-over year vs +2.1% forecast
- Italy's 5yr auction set a Euro-Era high at 6.47 vs 6.29
- The head of Italy's biggest union said the country's at risk of "social explosion" over recent austerity measures
- A Reuters poll shows about 50% of economists think the Fed will do a QE3 in 2012
The most entertaining newswire, hitting earlier this morning would have to be from IMF's Blanchard, who seems to have stated the obvious in discussing the various policy-based responses the EU has to the current crisis:
"Learning how to use all these tools is incredible complex."
Amen Blanchard... Amen.
Even after the morning's only economic data, Import/Export prices, things are remaining quiet and flat. MBS and Treasuries are still at opening levels and increasingly, it looks like the best chance for more pronounced movement lies with the 30yr Bond Auction at 1pm today. The caveat of "potential European headlines" should always be mentioned, but given the fact that the rest of the world snatched up 10yr notes with reckless abandon yesterday, cutting in line in front of primary dealers and the like seems to suggest that overseas accounts have already shown us whatever cards remained in their hand that we haven't already seen. It could be that the week unofficially ended yesterday with 10's and FOMC. We shall see.
Today's Data:
Import/Export Prices
RTRS - U.S. NOV IMPORT PRICES +0.7 PCT (CONS. +0.9 PCT) VS OCT -0.5 PCT (PREV -0.6 PCT)
RTRS - U.S. NOV EXPORT PRICES +0.1 PCT (CONSENSUS +0.3 PCT) VS OCT -2.1 PCT (PREV -2.1 PCT)
RTRS - U.S. NOV PETROLEUM IMPORT PRICES +3.6 PCT VS OCT -1.1 PCT
RTRS - U.S. NOV YEAR-OVER-YEAR IMPORT PRICES +9.9 PCT, EXPORT PRICES +4.7 PCT
RTRS - U.S. NOV NON-PETROLEUM IMPORT PRICES -0.2 PCT, YEAR-OVER-YEAR +3.7 PCT
RTRS - U.S. NOV IMPORT PRICES RISE FIRST INCREASE SINCE JULY, LARGEST SINCE APRIL (+2.6 PCT)
MBA Applications
- Overall Market Index up 4.1% to 677
- Purchase Index down 8.2% to 190.9
- Refi Index up 9.3% to 3573.7
- Average 30yr Contract Rate down 0.06 to 4.12