|10-Year: +20/32....3.133%.... GNMAs: .... USD/JPY: 111.97.... EUR/USD: 1.1593|
-- President Trump offers renewed criticism of Fed policy
-- September CPI (actual 0.1%; Briefing.com consensus 0.2%; prior 0.2%), Core CPI (actual 0.1%; Briefing.com consensus 0.2%; prior 0.1%), weekly Initial Claims (actual 214K; Briefing.com consensus 205K; prior 207K), and Continuing Claims (actual 1660K; prior 1656K)
-- $15 billion 30-yr Treasury bond reopening meets strong demand
Long Bond Leads Treasuries Higher
- U.S. Treasuries ended Thursday on a higher note with longer tenors displaying relative strength. The overnight session saw continued weakness in Asian markets while equity indices across Europe also faced selling pressure. The selling in global equities was a supportive factor for the bond market, which began rallying after yesterday's cash close, receiving an initial boost after President Trump criticized the Federal Reserve's tightening policy once again. President Trump repeated his comments on Thursday afternoon, saying the Fed is "out of control." Treasuries padded their opening gains after the release of a cooler than expected CPI report for September. Midday action saw some backtracking, but longer tenors climbed to fresh highs during the late afternoon. The long bond remained at the forefront of the advance, rising to a session high after the completion of a strong $15 billion 30-yr bond reopening. The reopening drew a high yield of 3.344%, which stopped through the when-issued yield by a basis point. The strong sale followed yesterday's weak offerings of 3-yr and 10-yr debt.
- Yield Check:
- 2-yr: -1 bp to 2.85%
- 5-yr: -7 bps to 2.99%
- 10-yr: -9 bps to 3.13%
- 30-yr: -9 bps to 3.31%
- DoubleLine founder and CEO Jeff Gundlach appeared on CNBC, saying he expects the 10-yr yield to reach 3.60% before the current swoon in Treasuries ends
- Total CPI and core CPI, which excludes food and energy, increased 0.1%. Both were expected to increase 0.2%, according to the Briefing.com consensus estimate.
- Those monthly increases left total CPI up 2.3% year-over-year, versus 2.7% in August, and core CPI up 2.2%, unchanged from August.
- The key takeaway from the report is that it helped temper concerns about rising inflation for the time being, yet with total CPI and core CPI running above the Fed's longer-run inflation target of 2.0%, it still left little reason to think the Fed is going to back away from a rate hike in December.
- Initial claims for the week ending October 6 increased by 7,000 to 214,000 (Briefing.com consensus 205,000) while continuing claims for the week ending September 29 increased by 4,000 to 1.66 million.
- The key takeaway from that report is that it remains reflective of a tight labor market, which will catch the Fed's eye as a contributing factor for why it can validate the continuation of gradual rate hikes.
- $15 bln 30-year Treasury bond reopening results (prior 12-auction average):
- High yield: 3.344% (2.999%)
- Bid-to-cover: 2.42 (2.40)
- Indirect bid: 64.4% (62.5%)
- Direct bid: 12.8% (10.0%)
- WTI crude: -3.0% to $70.98/bbl
- Gold: +2.9% to $1227.60/ozt
- Copper: +0.1% to $2.80/lb
- EUR/USD: +0.6% to 1.1593
- USD/JPY: -0.3% to 111.97
- USD/CNH: -0.5% to 6.887
- A Look to Friday:
- September Export Prices (prior -0.1%), Export Prices ex-agriculture (prior -0.2%), Import Prices (prior -0.6%), and Import Prices ex-oil (prior -0.1%) at 8:30 ET
- Preliminary October Michigan Consumer Sentiment Index (Briefing.com consensus 100.0; prior 100.1) at 10:00 ET