Treasury Traders Await Inflation Data :
(Hey, JR, NO inflation !!!)
Trade was fairly lax today, while the curve remained on the flattening track. The day had little to offer in the way of news and many are keeping their hands in their pockets ahead of inflation reports in the belly of the week. Gold traded through 16-yr highs while oil tanked and the dollar continued to stagger lower, although the euro currency may be topping at 1.30. Estimates for core PPI run the gamut from -0.3 to 0.4% and core CPI from flat to a 0.3% pop, if either or both come in as outliers it could whip up some serious action. The flattening on the day saw the 2-10-yr move off to 132.6 against 140.5 Thursday. In addition to PPI reporting tomorrow, net foreign security purchases ($58.957B prior please see chart on Bond Market Update page for more) will be reported (usually reported Thurs afternoons). Fed Gov Gramlich recently spoke at the University of Michigan saying, "Our low national savings rate and our high public deficits have in effect translated into national borrowing." Low savings rates and high public deficits require foreigners to finance trade and budget deficits. Gramlich comments combined with the strong indirect bidder participation in the 3- and 5-yr refunding auctions last week have the market paying careful attention to foreign participation in the US markets. Appearing on the Fed calendar tomorrow is Chicago's Moskow, and Philly Fed VP, Santomero. Moskow will be speaking on the US economic outlook in Chicago at the Annual Economic Forecast Breakfast at 9:00 ET. Santomero will be on he podium providing his insight on the future economic outlook at Carnegie Mellon. The 10-yrs are currently -03/32nds yielding 4.190%.
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