Monday opens with the 10 yr treasury not breaking out of its month-long trading range, the breakout is sending rates lower and should continue to push the 10 yr to 1.47% the reactionary low at the beginning of June. This week Treasury will auction $66B of notes and bonds; 3 yr, 10 yr and 30 yr terms on Tuesday, Wednesday and Thursday. Last Friday’s employment data was so weak that there is now a strong view in markets that the Fed will have to ease again with QE 3. That idea has pushed yields lower along with rate cuts in China and Europe last week.
Recent trade has been technically stronger in the MBS markets than treasuries with the 30 yr FNMA coupon breaking into new high prices before the 10 yr note broke through. The U. of Michigan sentiment index on Friday. Monday, one of our favorite reports, consumer credit, the pulse of spending and credit use. The week doesn’t present much key data; the minutes from the last FOMC meeting will be released Wednesday, weekly claims on Thursday is expected to decline 15K to 360K. Europe remains in the gun sights, last week not much out of the region except the ECB cutting rates. Nothing of substance from Germany, the key to the survival of the EU.