Learn from the Past
There were no domestic events today.
Central Bank Palooza
The People’s Bank of China kept their key interest rate at 3.85%.
Across the Pond
Eurozone: The G20 Meeting begins today.
Japan: Jibun Manufacturing PMI 48.3 vs. estimates of 48.9.
Germany: PPI 0.1% vs. estimates of 0.1%.
Great Britain: Retail Sales 1.2% vs. estimates of 0.0%
Canada: Retail Sales 1.1% vs. estimates of 0.2%
What’s on the Agenda for this Week?
Three ThingsThe three areas that have the greatest ability to impact backend pricing this week are: (1) Coronavirus, (2) Domestic Flavor, (3) Gobble Gobble.
(1) Coronavirus: The increase or decrease in hospitalizations, cases, and closings will continue to be the major driving force in bond prices as traders digest the magnitude of the economic headwinds. Some major banks are now estimating a negative GDP for the first quarter.
(2) Domestic Flavor: This is a very big week for economic data with major releases that have the gravitas to move pricing: GDP (revised), PCE (the Fed’s inflation “trigger” rate), Weekly Jobless Claims, Durable Goods Orders and more.
(3) Gobble Gobble: The bond market is officially closed on Thursday in observance of Thanksgiving but then will reopen on Friday only to close early at 2:00 pm ET. But most traders will stop working Wednesday at 2:05 pm ET (right after the Fed’s Minutes hit) and will not come back until Monday. This means very “thin” volumes on Wednesday afternoon and Friday which can skew pricing.
Here is this week’s Treasury auction schedule:
11/23: 2 year and 5 year notes
11/24: 7 year note
Manufacturing: The lower tier reports Markit Manufacturing (56.7 vs. estimates of 53.0) and Markit Services 57.7 vs. estimates 55.3) showed very solid expansion in November.
Treasury Dump: There were two auctions today. The 2 year note was for $56B and went off at a high yield of 0.165% (vs. 0.151% in Oct). The 5 year note was for $57B at a high yield of 0.397% (vs. 0.330% in October).
On Deck for Tomorrow: FHFA Home Price Index, Case Shiller Home Price Index, Richmond Fed Manufacturing, Consumer Confidence and 7 year note Treasury auction.