TRD: Treasurys Turn Higher On Housing, Chicago Fed Data
By Ben Eisen, MarketWatch
Treasurys shed early losses Monday after a spurt of data offered further evidence of slowed economic growth in March.
Existing home sales declined 0.6% in March to a seasonally adjusted annual rate of 4.92 million, said the National Association of Realtors. That fell short of an expected annual rate of 5.03 million.
The Chicago Fed also released its national activity index that showed U.S. growth was below trendline in March.
The index recorded a reading of -0.23 in March, a swing downward from the +0.76 recorded in February. Positive readings indicate above-average activity while negative readings show below-average growth.
That pushed Treasury prices higher and yields lower. The 10-year note (10_YEAR) traded at 1.685%, a drop of more than 2.5 basis points on the day, while the 30-year bond (30_YEAR) traded at 2.864%, a 2-basis-point drop. The 5-year note (5_YEAR) was at 0.686%, a drop of more than 2 basis points. A basis point is equal to 1/100 of 1%.
"I think the reaction to the economic news and seeing the stock market moving into negative territory. The combination is impacting the market," said Kevin Flanagan, chief fixed-income strategist for Morgan Stanley Wealth Management.
The Dow Jones Industrial Average (DJI) is down over 80 points on the day while the S&P 500 (SPX) is down more than 5 points. Treasurys are likely to continue taking their cues from equities throughout the day, Flanagan said.
A rally in European and Asian stocks signalled a more optimistic tone in the global markets earlier Monday. Ahead of the Chicago Fed's release, Treasury prices dropped and yields rose after the Nikkei 225 Index climbed nearly 2% Monday to close at 13,568.37.
"Failure to raise concerns over the resultant weakening of the Japanese yen has encouraged further strength for the Nikkei 225 index, which rose to its highest level since 2008," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. LLC, in a note.
Italy, which finalized its election of president Giorgio Napolitano over the weekend, also led European stocks higher as the Stoxx Europe 600 index gained nearly 1%.
This week, the Treasury market will contend with fresh supply. The Treasury Department auctions off $35 billion in 2-year notes (2_YEAR) Tuesday, $35 billion in 5-year notes Wednesday and $29 billion in 7-year notes (7_YEAR) Thursday.
