U.S. NY Fed "Empire State" Index Preview U.S. NY Fed "Empire State" Index Preview: The May Empire State Index will be released Friday to kick off the month's sentiment data and the headline should climb to 4.0 (median 4.0) after dropping to -1.2 in April. The April release included a decline in the forward looking new orders component to -6.0 from -2.4 which could pose downside risk to the release.
Treasury Action: bond yields bounced Treasury Action: bond yields bounced following the 30-year auction that came in shy of expectations after tailing out and a subpar cover. The current bond yield backed up over 2.06% briefly vs the 3.04% area ahead of the sale and compared to the 3.044% award rate on the new paper. That leaves the 3.10-3.12% area as the next target on the upside ahead of the 3.25% psych area, while the 3.00-2.95% zone reverts to yield support.
Treasury's $16 B 30-year bond sale was on the sloppy side Treasury's $16 B 30-year bond sale was on the sloppy side. The bond stopped at 3.044%, tailing out from 3.025%, after having richened a bit into the bid deadline. That rate compares to the 2.597% for April and is the highest award rate since November's 3.092%. There were $35.2 B in bids for a 2.20 cover, not better than last month's poor 2.18, and is a little below the 2.40 average. Indirect bidders accepted 50.8% and down from the prior 55.1%, though it's marginally above the 48.5% average. Direct bidders took 11.1% compared to the 7.5% in April. Primary dealers were awarded 38.0% versus 37.4%.
U.S. bond technicals: yields backed up U.S. bond technicals: yields backed up over a half percentage point on the cash bond from early April lows near 2.44% to May highs of 3.128% before steadying back near 3.055% currently heading into the $16 B auction results shortly. Thanks to the repricing of Bunds this has created quite a wide gap with both the 2.615% 200-day and 2.857% 100-day moving averages, which does leave some room for a mean reversion if not a bearish sea change in bond market sentiment. Near-term ranges are defined by Wednesday lows of 2.958% and Tuesday highs of 3.128% to set the next directional leg.