Interest Rate Market Update, April 4 2019


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Markets: April 4, 2019

  • UST 10s 101-01 (2.506%) off the 100-27 (2.526%) close.  We traded 102-14+ at the high on 3/27, a 2.34%, but it will take weak data to get us back there. To get through 2.34%, one of the most important market levels over the last 7 years, it will take a lot of weak data.  It will take a strengthening of the theme of global then US economic slowing that has taken us from the 3.23% low this cycle to 2.35% last Wednesday.
  • Strong Chinese manufacturing data over the weekend drove us through 2.44%, and then a not weak Jan/Feb Retail Sales Monday got us to 2.50%. Then we got strong Eurozone Services PMI.
  • Over the last week or so a nascent theme may be developing; weak global manufacturing data due to the tariff threat, but continuing strength in services worldwide. That also took some wind out of the market.
  • It looked like it might crack 2.54%, but very weak German manufacturing data helped the Bund this morning.


German Industrial Orders, Month Over Month Change

  • Down 4.2% is a big drop.
  • They specifically mention exports and capex as the reason.
  • That leads directly back to tariff fears and the uncertainty it’s created

.GerManuf March 2019


Last 12 closing Prices on the UST 10-year

  • From the launch from 2.63% on March 19.
  • To the bounce off of 2.34% on March 27.
  • To return to near the 2.54% level on 4/1.



Two-day movement of the UST 10-year note

  • We opened down hard yesterday morning due to stronger services data from the EU (LHS of chart).
  • We opened up this morning (RHS) on very weak German Industrial Orders, down 4.2% m-o-m.
  • 100-24 is 2.54%, and we have not hit that since we came through on March 21.


UST10year chart

Source: The Wall Street Journal


Economic Data This Week

Tomorrow: 8:30 Payrolls (180k consensus).


Eurozone PMIs

  • Stronger than expected EU services data sent bonds down yesterday.
  • Weak German Industrial Orders stabilized it and probably spared us an attack upon 2.54%

Bottom Line:  Expect a break of 2.54% to 2.63% if payrolls are strong without down revisions from previous months.  Anything over 180k we think will do it.  The $73B April refunding of 3-year, 10-year, and 30-year bonds coming next week, so it only needs a little nudge to roll downhill through 2.54% to the next level, 2.59%, and then a powerful level at 2.63%.

If we get a weak surprise of under 80k, we will retake 2.44% and wait for more data for an attack upon the big one- 2.34%.

Author: bondworldtrader

I am an old US Treasury bond arbitrage trader. I LOVE markets, the challenges in anticipating how they'll move, technicals, auctions, the Fed. I currently trade mortgage securities. My goal and interest is teaching bond math, Fed policy, and arbitrage techniques to non-professional investers and traders.

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