US Treasuries Down, US Dollar Flat
US Treasury Complex
2Y Unch at 100 06/32
3Y -02/32 at 100 01/32
5Y -06/32 at 101 12/32
7Y -10/32 at 103 04/32
10Y -16/32 at 103 17/32
30Y -1 04/32 at 111 28/32
US Dollar Index (.DXY)
EUR/USD +25 pips at 1.1575
GBP/USD -35 pips at 1.5105
USD/JPY -80 pips at 118.00
USD/CHF -115 pips at .8640
AUD/USD -75 pips at .8095
USD/CAD +255 pips at 1.236
.DXY was whipped around as central banks remain active ahead of the ECB decision Thursday. Early headlines suggest the ECB will announce a EUR 50-B month QE package that will run until Y 2017. This represents an approximately EUR1.2-T package, it is at the high end of expectations. The Buck was sliding early as it fell from 92.80 to the 92.20 area, it has erased those losses as as the rumors of the ECB program filters through the market.
- EUR is up on the day, a surprise. Euro was gaining on the USD with speculation being short covering ahead of the ECB news Thursday. The rumor is that the ECB will announce a EUR50-B a month QE program that will last for perhaps 2 yrs. This would increase the ECB balance sheet by approximately EUR1.2-T. Details of what assets would be purchased remain unstated, and that will be the Key on how the market takes value of the package. EUR pushed to 1.1679 before reversing and giving up the majority of the gains. EUR is now trading at 1.1580.
- GBP has whipped around in the 1.5100 area. Cable fell earlier on the release of the latest Bank of England minutes, which were more Dovish than expected. The minutes showed that the bank members voted unanimously to keep rates unchanged. This marked a divergence from the prior minutes, which showed 2 members vote for a rate hike.
- JPY has been able to drive higher despite a run on risk assets in response to the ECB rumors. The Bank of Japan (BOJ) met overnight and decided to leave its asset purchase program unchanged. The BOJ did extend some of its loan program maturities, a tweak to the program, and it lowered its inflation and growth outlooks for the region.
- CHF is -135 pips at .8615. Suisse has struggled to gain traction since last wk’s removal of the EUR/CHF1.20 floor, failing several times at the .8800 mark. Bulls will look to defend the .8400 area and put in a tradable bottom.
US Treasuries reversed
US Treasuries a notable reversal ahead of the Noon hr.
- The long bond has reversed from leader to laggard with the 30Y now +5.6bpts at 2.454%. The yield on the long bond is now 10bpts off the earlier lows.
- The 10Y is +5.1bpts at 1.858%. Action is now up more than 15bpts off Friday’s low.
- Modest selling in the belly of the curve has the 5Y +3.7bpts at 1.330%. A test of 1.450%/1.500% resistance cannot be ruled out.
- A steeper curve has developed as the 2-10-yr spread trades 137.5bpts.
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