Jun. 23, 2009 (Action Economics) --
Action Alerts
Notable Quotes
The Big Picture
Technicals: The 10-year has extended its rebound from the Jun 19 low at 93-25+ (3.886%) in contrast to stocks as expected but the Jun 16 peak at 95-23 () should cap the upside prior to Wed's Fed meeting. Beneath 95-23 we can't rule out a sharp to affirm support from the Jun 8 low at 93-14+ () en route a stronger floor. On the other hand a breakout above 95-23 should result in a second test of 96-20+ (3.528%) or possibly the May 29 high at 97-11 (3.442%) a little further out before running out of gas and resuming a medium term bearish bias.
Inside the Numbers
Treasury Market Outlook (June 23)
Action is likely to rev into full gear today as investors look to the $20 bln 2-year note auction which kicks off the $104 bln 3-pronged coupon offering, as well as the start of the 2-day FOMC meeting. There's also data with May existing home sales, the April FHFA home price index, the June Richmond Fed index, and weekly chain store sales. Yesterday's trading saw Treasuries make solid gains as stocks tumbled on increased uncertainty over the growth outlook after the World Bank downgraded its outlook, as geopolitical concerns (think Iran) weighed, and as the Fed bought some $7.5 bln in 6-year Treasuries. Longer dated yields fell 12 bps, with the 10-year at 3.69% as the curve flattened.
Today's 2-year note auction is expected to see decent results, though Monday's hefty rally may have taken a lot of the shorts out of the market. The inability to build in much of a concession could also frustrate some investors. Uncertainty over Wednesday's FOMC policy statement shouldn't have huge impact, though, as no one expects any change in rates near term, or indeed for many months to come. We hope the Fed will start to shift toward a more neutral balance of risk statement, but most in the market doubt that will be the case this time around. As for the data, we expect sales to rise 2.6% to a 4.80 mln rate (median 4.80 mln) after rising 2.9% in April to 4.68 mln. Other data this week includes durable goods,new home sales, final Q1 GDP, personal income and consumption, and consumer sentiment.
