Contact me at Bondworldtrader@gmail.com
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
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.
Source: The Wall Street Journal
Economic Data This Week
Tomorrow: 8:30 Payrolls (180k consensus).
- 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%.