U.S. Treasuries remained stable with the 10yr still trading under 2%, and the 30yr below 3% as traders position for Friday’s nonfarm payrolls report. Germany successfully auctioned €4.057B at an average YTM of 1.93%, which was “Not so great,” according to SocGen’s Sebastien Galy. The Euro Stoxx 50 Index closed down -1.67%, led by Spain’s IBEX 35 Index & Italy’s FTSE MIB Index, which were down -1.72% and -2.04% respectively. EUR/USD declined below $1.30 after reports out of Europe that indicated services and manufacturing output contracted and inflation slowed. An increase in the cost of insuring sovereign debt was led by Spain, whose 10yr spread to German Bunds is at 304 bps (up 26 bps since Tuesday), amid more speculation the indebted nation may need to seek aid from the EU and IMF.
U.S. Equity markets were flat, with the S&P 500 up +0.02% at close, indicating traders are awaiting economic reports coming out today and Friday.
Global equities are down this morning with S&P 500 futures down -0.442%, the Euro Stoxx 50 Index down -0.92%, and the Nikkei 225 closed down -0.83%. U.S. 10yr treasury yields continue to be halted by resistance around 2.00%; overnight yields were modestly lower and curves were flatter- consistent with overall risk-off sentiment. Daily charts of U.S. treasury yields show more consolidation; while yields are up from the 1.64% on improving economic data, they remain capped by ongoing concerns with Europe and tomorrow’s U.S. non-farms payrolls.
France sold €4.02B 10yr bonds at an average YTM of 3.29%, up from 3.18% at a Dec. 1 sale, with a bid/cover 1.64 from 3.05. The EFSF will price €3B its Feb. 2015 notes to yield 40bps more than the benchmark swap rate today, compared with the 6bps spread it paid to sell €5B July 2016 bonds last year. Hungary’s debt costs also rose in an auction in which they sold 35B forint of 1yr bills; the catalyst being concern the EU and IMF may not resume aid talks.
U.S. Jobless claims dropped 15,000 last week to 372,000, slightly beating the median estimate of a Bloomberg survey showing that economists forecast 375,000 claims.
Have a great day- expect more commentary tomorrow when non-farm payrolls are released.