The Day Ahead: Fighting Off Another Weak Overnight Session. Moderate Econ Calendar


As we look ahead to the current week’s calendar of events, we’re
starting to think that last week may have only been a 
diversion for the real attack of volatility over
the next 5 days.”  That was the first sentence I wrote this week.  I went on to basically say “yeah, yeah, yeah…. scary events, but we’ll believe it when we see it.”  Well, we’ve seen it.  
Yesterday’s high volume ground-holding at 2.29 in 10yr yields has NOT held up overnight, as we open up over 2.33 once again and MBS open near yesterday’s lows just over 102-00 in Fannie 3.5’s.   

Bond markets can’t catch many breaks this week as most events have been decidedly “risk-on.”  Especially, we’d note events in Europe.  While no one is shouting “Europe is fixed!” from the rooftops, there are faint murmurs on the wind to the effect of “Europe maybe, just maybe, won’t catastrophically fail.”  I can’t emphasize enough that this fear of some sort of full-blown melt-down, more than any other single factor, is the culprit behind the push below 2% in 10yr yields.  Remember…  At the height of the collapse in 2008, we “only” saw 10yr yields get down to 2.04.

Although we grew tired and almost dismissive of the Greek bailout by the time it was done, it was a major turning point between “flat/boring” and “let’s try something new.”  It coincided, unfortunately for low yields, with numerous other factors that, in and of themselves, didn’t have the juice to get yields up out of the recent range, but taken together, leave us in the current territory.  We’ll revisit the events that contributed to this from earlier this week and the overnight session later today, but here’s the domestic data on tap today:

830am – Consumer
Price Index 
– News media loves to tout
the inflation reports as big market movers.  We think that’s a bit
overdone, but wouldn’t rule out some market reaction to results that fall far
outside the consensus range, although CPI PPI in
terms of significance.  We’re still not too impressed/concerned with
inflation data at the moment.  Yes… oil is high.  This causes
prices to rise.  Markets know this.  Again, excluding Food/Energy,
Consumer Prices are seen NOT rising, just like Producer Prices, +0.2 vs +0.2
last time.  The headline is expected higher at +0.4 vs a previous reading
of +0.2.

Production/Capacity Utilization 

Moderately important report.  Output seen expanding 0.4 percent vs 0.0
percent previously.  Capacity Utilization seen at 78.8 percent vs 78.5
percent previously.

 Consumer Sentiment – Always a potential market mover,
but would need to deviate more than it has been from estimates in order to
cause much movement.  February’s final reading was 75.3 and Friday’s
preliminary March reading is seen at 76.0



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