Morning Interest Rate and Treasuries Report

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April 13th, 2012

Treasury prices have posted moderate gains this morning as the market has seen a significant improvement in sentiment during the last 24 hours. With evidence of a sharp rise in Spanish bank borrowings overnight and a weaker than expected Chinese GDP reading, many traders feel that there has been a sizable amount of safe-haven support for US Treasuries this morning. The positive shift in Treasury sentiment may have been triggered by the 30 Year auction results yesterday, as June Bonds recovered 22 ticks from the lows of the session. While the Chinese GDP number overnight may not have been totally discouraging, the market reaction to that data provided enough macro economic uncertainty to give additional strength to Bonds and Notes during the early Friday US trading. Some traders were also concerned with the jump in Spanish bank borrowings feeding into generally higher peripheral EU debt yields as well. Looking forward to this morning’s session, many traders are not expecting the US CPI report to create much of a reaction with Bond and Note prices, as inflation would have to provide a very shocking reading just to make that news a market-moving influence today. The only other notable US data due out today is a private US consumer sentiment survey, and that report might not carry much weight with expectations calling for a number little changed from the prior release. Many traders feel that the primary impact on Treasury prices today is likely to come from dialogue by Fed officials, or from US corporate earnings news. Some players think that a slide in the June S&P below the 1375.00 level could spark a fresh wave of safe-haven buying of Bonds and Notes, and therefore the earnings reports from JP Morgan and Wells Fargo this morning might set the tone of the Treasury market for the day. Some in the market feel that with Treasury prices showing initial gains this morning and equities off to a weaker start, it might not take much in the way of positive earnings from the US Banking sector ahead of the Wall Street Open to see improved macro-economic sentiment.
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