Markets get a boost on strong Treasury auction

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Published Date 7/24/2024

Yesterday no change across the curve, this morning rates began somewhat better. The 10 at 8 am ET -2 bps. Stock indexes began lower after Tesla earnings disappointed.

Weekly MBA mortgage applications last week -2.2% from the +3.9% the previous week, purchase apps -4.0% from -2.7% the week before, refinances +0.3% after jumping 15.2%.

Yesterday’s 2 year note auction was one of the strongest auctions seen in months, recent auctions have met with good demand but yesterday was a showstopper. Prior to the auction in WI trading the rate was 4.457%, at the auction the yield was 4.434%, a 2.3 bp tail. Yesterday prior to the auction the current 2 year note traded at 4.51%, now at 4.42%. The huge decline adds to the outlook that the Fed is about to begin lowering rates. The 2yr more sensitive to Fed movement than at the long end of the curve.

At 9:30 am the DJIA opened -165, NASDAQ -265, S&P -49. The 10 year note at 9:30 am 4.23% -3 bps. FNMA 6.0 30 year coupon at 9:30 am +7 bps from yesterday’s close and -4 bps from 9:30 am yesterday; the 6.5 coupon +7 bps and +1 bp from 9:30 am yesterday.

At 9:45 am the FLASH July PMI, the composite at 55.0 up from 54.8 in June, manufacturing dropped into contraction at 49.5 from 51.6 with forecasts at 51.6, the weakest manufacturing index this year. The service sector index thought to be at 55.0 increased to 56.0 the highest since March 2022. In Europe, the PMI composite index stood at 50.1, just above the 50 mark that represents the threshold between growth and contraction. The services sector, which expanded at a slower rate than in June at 51.9, while manufacturing activity shrank more than any other month this year, at 45.6. Germany, Europe’s manufacturing powerhouse, fell back into contraction after three straight months of fragile growth amid a continued decline in industry, the surveys suggest.

At 10 am June new home sales were expected at 640K units, sales dropped to 617K from 621K in May, down 5.4%. The median sales price is now $426,900. "We're seeing a slow shift from a seller's market to a buyer's market," said NAR Chief Economist Lawrence Yun. "Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis."

This afternoon Treasury will auction $70B of 5 year notes.

Source: TBWS

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