Bid: The bonds were able to pull back to better levels in the final stretch of the week with the long end leading as trade rolled through a batch of at-record sized 3-10-and-30-yr auctions. The final leg, the 30-yr went off extremely well (the other 2 weren't chopped liver either), while a crush of global supply also went well through the week. The week ahead the market has a break from the major supply gun, but there will be a number of relevant data points and the FOMC meeting. The curve saw a steep flattening through the past 3 sessions with the 2-10-yr yield spread holding near 274 after ticking to levels last seen Fri. The dollar was dragged down all session with the index taking out 79.70, while the euro got run up to its best levels in a month to trade just shy of 1.38. Mon has NY manufacturing (8:30), TIC flows (9), capacity utilization and industrial production (9:15). Later in the week will be announcements on the 2-5-and-7-yrs to be sold the following week.

WSJ: French Finance Minister, Christine Lagarde says Greece has "for once, over-delivered from what was expected... IFR: Lagarde says she's happy the Euro weakened... Le Monde: Euro zone preparing EU20-25 bln aid plan for Greece... DJ: Euro net short positions rise to record levels... Reuters: White House says Yellen a top contender for Fed vice chair... Bloomberg: Krugman says China Yuan policy depresses global growth... forexlive.com: Senator Schumer plans China currency legislation in coming days.

Offered: The dollar was knocked lower on the week with the euro getting a push with positive regional data, serious short coverage and anticipation that the Fed will remain in the extreme low rates for most of the year (at least). Even if the FOMC tweaks the language in the statement to a less ambiguous phrase than "extended period," such as Evan's "some time," the market should be prepared for such a move. The buck was backed off to the worst level in a month on the euro while the index saw the lowest since mid-Feb. The action has been generally corrective, adding to the euro upside against the buck and yen, with more likely to come. The commitments of traders report for last week shows that CME record short speculative positions far outweighed longs (-107,140 to 32,589) in the week ended Tues, while net long the yen for the second week running. The yen was generally offered, stalling out at 90.50 on the buck and 124.50 on the euro. Spot gold was knocked off to trade 1198.70, while crude was sold as demand expectations were dampened on sliding confidence, to settle 81.24 (-0.87)

Holding: The market has been drifting lower on the long end, with the longer end battling against the drag. There may be some late rushes of buying into the weekend, but it would be muted as buyers square. Trade is getting some relief buying as the week ahead, while littered with some relevant data and the FOMC, there are no big new auctions, but the global supply train should keep a-rolling

Long Run: Longer dated treasuries were able to take back pretty much the whole week, covering the range in a single session on the 10-yr and then some on the 30s. The 10-yrs swung to 3.681% from 3.775% while the 30s saw a 4.613% to 4.702% range while the shorter maturities were held a bit tighter on the day. The mixed data and initial "optimism" on the global economy took the market off early, while the drop in confidence, added to players conviction that the Fed will make no, or absolute bare minimum, in changes to the statement (outside of confirming the ending date on their mortgage related buying programs). The stock slide has helped keep prices buoyant, while weekend safety buying adds to bid. The long bond has been the biggest winner as curve trades switch to a flatter bent, while funds were reportedly buying midday. The market should get boxed in for the remainder of the session, with a general drift lower. There were reports of a "huge, fat finger" error in the Eurodollars this morning, which apparently confused things following the UofM report, which was also described as "somebody's system lost [it]." The curve has been swung back to Fri levels with the 2-10-yr yield spread running 273.8, having found a 273.1 a backstop. The dollar has continued to struggle with the index dropping to 79.80 and holding since the late data. The euro has seen some profit taking back it off the best levels since mid-Feb, but seems to have stalled at 1.3750/60 while the yen has gotten some squaring to help it off its worst since late-Feb on the buck and euro.

 

Foreign Correspondent: The buck is still trying to recover some lost ground with help in part from improved retail sales data and a report suggesting next week's German ZEW survey will "likely post its sixth consecutive fall in March in response to the recent run of fairly downbeat data on the German economy" [DJ]. Profit taking into the weekend and next week's FOMC meeting is likely keeping things in check. The index is struggling to reclaim the 80-handle while support sits near 79.55, a break of which could hasten selling pressure. Better-than expected data across the EuroZone (including Greece) helped provide enough fuel to send the euro well over the 1.37 wall it had been wrestling with since the end of Feb. While headwinds remain near 1.3840 and figure resistance at 1.40, the euro has an "upside measured objective at 1.4230, near Jan lows" The oversold bullish reversal on the weeklies is driving this move higher" [IFR]. The pound is still working its way higher with stops run above 1.52. Trade has backed off slightly at the figure but a clear path has been blazed with the late Feb breakdown level and the daily down trendline near 1.5330 in the cross-hairs. The yen has been on the rebound all morning. "The move was in stride with a pull back in commodity markets as well as a dip in the yield on the US-10 year note" [IFR]. Against the buck, daily down trend resistance sits near 91.35 and stocks are only muddling along so trade may be backing off heading into the weekend and next week's BOJ & FOMC. Bids firm up just above 90. The euro failed near Feb 22 highs of 125.25 and the action has slowed precipitously. Buyers will likely re-load on a dip near 124 for a potential break of 125.25.

Pushing Highs: Bonds have added to gains in slowed size, with 10-yr taking out the 3.695% point like butter taknig out stops to tag 3.682%. The long end is leading the charge while the shorter stuff lags as the curve is bent sharply flatter with the 2-10-yr yield spread at 273.

Weighted: The dollar has been on offer with the euro trading back to mid-Feb highs, with the Greek recovery looking better along with regional data improvements. The buck got an early bounce on the upside surprise on retail sales, but gave up its gains as confidence dropped, with the index heading back to tick around the 79.80 area after finding some support near 79.70 and looking to tag 79.60. The market should see some clean-up ahead of next week's monetary policy-palooza with the FOMC and BOJ both meeting and possibly having something new to say (but don't bank on it). The euro was able to take out the 1.3680 point to track steadily to 1.3796, backing off some on the early domestic data, but looks to hold near the 1.3750 point. The yen was on a run lower with reduced safety bids but was able to regain ground on the UofM report on the buck, back to 90.20 from near 91.10, and seeing a similar move on the euro to giving up 124.20 from 125.20 its worst in 3 weeks. Gold has been sliding, with added drag on the sales report, with spot finally getting thisclose to the 1100 mark, now 1103.45 (-6.05). Crude also gave up a push better on the lack-of-confidence number trading to new lows 81.10 (-1.00).

Bounce: Bonds went on a run higher as the market flipped following data and falling stocks. The market apparently had a delayed reaction on the confidence drop and flat inventories report, which helped offset the retail sales jump. The curve was swung steeply flatter with the short end lagging and the 2-10-yr yield spread near 275 versus 284 and change mid-week. The 10-yr saw a run to 3.71% from 3.75% with an eye on the 3.695%, but size has slowed since the initial bump better and may need some new news to get it over the hump. Some weak shorts got clobbered on run with futures players reporting some momentum while implied volatilities also got a boost as the long end led the charge.

Run Up: The market was trying to get back some ground with the drop in the UofM sentiment countered some by an uptick in 1-yr inflation expectations (5-yr flat). Business inventories was a nonevent and the market will continue to find reason to lean on prices with the global growth picture looking better in general while price pressures, for the most part, remain tame. The curve has been swung flatter with the shorter end deteriorating faster. The 2-10-yr yield spread is running near 276.5, while the 2-yr is offered off to its worst level in 2 months. The market jumped over the past few minutes with the 10-yr running to a 3.719% yield from 3.75% in a straight line and the 30-yr saw 4.645% from 4.675%.

Leaned On: The market has slowed and is pulling back in pained trade ahead of the sentiment report. The market will be looking for any excuse to sell as the day's attitude is all about global recovery, even as the recovery is in recovery. The market will be watching for any upticks in inflation expectations for another reason to pressure prices

Edging Back: Treasuries are sneaking back a bit from the initial sell-off following the boost to retail sales. Appliances and electronics saw the best bump in a year at 3.7%. BBH's Chandler notes teh report was "much stronger than expected, even when taking into account the downward revisions in January. A picture of a broadening of the recovery is emerging...Combined with yesterday's news of a smaller US trade deficit and Canadian figures, including today's Canadian employment (even discounting the Olympic effect), the strength of the North American economy is evident."

Boom: Retail sales were able to post a positive print as opposed to the anticipated -0.2% drop, while the jump ex-autos was a solid 0.8% and the 0.9% showing in the component excluding autos and gas station input. The market was slammed on the initial print with the 10-yr swinging the yield up to the 3.775% point from 3.729% ahead of the report. Trade should recover some fairly quickly as the data gets broken down and trade settle is for the sentiment report.

Offered: Treasuries are on offer ahead of data with the market shrugging off the run of solid to stellar auctions in a return to risk as data and troublesome countries improve. The 10-yr is pushing at 3.75% and the worst levels since late Feb. Global bonds are mostly lower with EuroLand data and talk of yet further added supply to aid Greece. The curve has been swung from a flattening track to a steeper bent as positions are squared ahead of data with the 2-10-yr yield spread now 278 from near 276. The dollar was given added pressure, off to the lowest on the index since Feb 17, as the euro finds its way through 1.3680 to run at 1.38. The yen is on offer as riskier plays gain attention. The day’s data may offer some action, but there will be a toss up if a worse retail sales report will be trumped by the potential improvement in sentiment. retail sales (8:30), while the UofM sentiment number (9:55), while business inventories hit late (10).

Table of overnight activity in the financial markets.

Table of overnight activity in the financial markets.

The 10-yr Note is off its best levels of the morning and is trading flat while equities have moved into positive territory. The dollar index is weaker ahead of February Retail Sales. The yen was close to a two-week low vs the dollar before recovering; it is now stronger vs the dollar. The BOJ meets March 16-17 to discuss further monetary easing measures. The euro strengthened vs the dollar. Retail Sales for February are due at 08:30; consensus calls for -0.2%. At 09:55, UofM sentiment data is due; consensus calls for 74.0. There are no auctions today. The 2-10-yr yield spread is 278 vs 277.2 from yesterday afternoon.

Split Ends: Treasuries were mixed, with the long end finding a bid while the shorter stuff was under pressure, The market rolled through the last on the auctions and, even after a run of decent offerings, the 30-yr was still a standout. Buyers came in hard for the offering, pushing the yield off to 4.679%, well below where it was expected and a virtual 30-yr bargain for Uncle Sam. The indirect bidders take was a little light, but it was made up for by a record take by direct buyers, who picked up nearly a third of the offering. Direct bidders, or "patriots" as one player jokingly refers to them (although of what nation it is hard to say), confound dealers as the market likes to have a better handle on who is getting how much of what. The new fixation is likely to continue to be a large part of future auctions, if which, there will be none in the US until the week of the 22 nd. The curve was wound well flatter into the auction, but picked up some speed once the issue was done with the long end pushing yields lower while the shorter pushed prices lower or were flat. The 2-10-yr yield spread was off to the week's flattest running 277.2, but remains not far form historic steep levels, so there should be room for further tightening. The dollar was traded lazily, with the euro repeatedly banged up against the 1.3680 point, unable to make a go of it and sitting in a range. The yen was also ultimately range bound, and headed into the end of the session near 90.60 near the week's lows. The day ahead has one big ticket item, retail sales (8:30), while the UofM sentiment number for Mar may have some impact (9:55), business inventories should have little effect (10).

The 10-yr Note is at its worst levels of the morning. Equities have recouped earlier losses and are looking at a flat to slightly negative open. The euro was flat vs the dollar. The yen was flat following news that Japan's economy grew less than initially estimated in 4Q09. Continuing Claims for 2/27 and Initial Claims for 3/06 are due at 08:30; consensus calls for 4500K and 460K. $13 bln in 30-yr Bonds will be auctioned. The 2-10-yr yield spread is 282 vs a yesterday afternoon level of 281.5.