What are traders chatting about this morning? Treasuries ...
Good Morning! US Futures are higher, led by a 35bp pop in Nasdaq shares. Focus remains on the Sovereign Bond Markets which sees the US 10YY lower as EU GDP hits in line, but German growth way light, contributing to some weight on German Yields. Stocks are having a nice day in Europe, with the DAX up 75bp as Fins and Tech rally. Overall, Interest rate sensitive shares, such as those of real estate groups, are among the leaders in Europe with very little red seen across the continent. Over in Asia, Japan rallied 70bp as the Yen fell - while Japanese government bond yields, which had jumped 5bp on Tuesday following a poorly received auction of new paper, eased 1bp. Aussie rose 70bp following the release of the country's budget - while despite the fresh stimulus announcement, Chinese shares dropped 60bp.
With the US 10YY under 2.22%, and below yesterday's lows, focus remains on the recent correlation of bond prices to equity - with all eyes on the 10Y note auction after the strong 3Y auction yesterday. With better EU data, the Euro is in rally mode, and the Yen is breaking north early - weighing on the DXY - which tested yesterday's low in the overnight near 94.20. This tailwind is coupled with China's factory output rising nearly 6% in April y/y, helping Industrial commodities like Silver jump 1%, but Copper remains red (no pun). Despite the IEA raising its forecast of 2015 non-OPEC production growth by 200,000 barrels a day, the Oil complex is mostly higher as we had a Big API Draw last night - 2MM, almost 10x what the street was anticipating. Softs are mostly green as we get more and more "El Niño" headlines globally. Scheduled Catalysts today include Advance Retail Sales at 8:30; Business Inventories and Atlanta Fed Business Inflation Expectations at 10am; DOE data for Crude at 10:30; and the $24B 10Y auction at 1.