Supply vs. Demand
The government's heavy issuance of notes and bills has been one of the biggest drivers of Treasury prices of late, and the past week was no different. On Friday, debt prices fell for a second day as the prospect of billions in new notes next week weighed on the market. The 10-year notes were yielding 2.932 percent, after trading 30/32 lower on Friday.
At the same time, traders say the Fed's purchases are also affecting the market. "There is no market when the Fed isn't buying it. The street owns nothing but Treasurys. If they need to lighten the inventory, and the Fed's not there, it just falls apart," said Kevin Ferry of Cronus Futures Management.
The dollar, in the past week rose 1.2 percent against the euro, to a level of $1.3026 per euro. Meg Browne, a currency strategist with Brown Brothers, said she believes the euro could be under pressure in the coming week as investors watch a heavy calendar of European data.
Browne said currency traders will be watching the Treasury's release on what the bank stress tests will involve. The actual tests are expected to be released May 4. Around the IMF, she expects possible volatility from the potential comments of finance ministers. "I think there could be volatility. I'm sure somebody like the French finance minister could say something," she said.
The most important pieces of data in the coming week are March existing home sales Thursday and March durable goods on Friday. Leading indicators are reported Monday, and new home sales are reported Friday. Weekly jobless claims are reported Thursday as usual.
Also important is testimony Tuesday from Treasury Secretary Timothy Geithner who appears before a Congressional panel to discuss the Troubled Asset Relief Program funds.
Oil fell $1.91 per barrel, or 3.7 percent for the week to $50.33 per barrel on the Nymex.
John Kilduff, senior vice president at M.F. Global said oil could be getting ready to break out.
"Crude oil prices have been mired in a range between $48-$52 for the past six weeks," he said. "When prices test the upper end of the range, there is a feeling that the worst of the economic crisis is behind us, and, at the bottom end, there is a sense of gloom. The range has tightened even more so, in the past two weeks, which is a long enough period to presage a breakout, one way or another, shortly."
"Given the overwhelming amount of crude oil in storage, there is a compelling argument that the breakout will be to the downside. However, the drop likely won’t last long, as dramatically low refinery operating and even the OPEC cuts should start to bite," he said. He said he would be a buyer on dips.
Among the many earnings in the coming week, Bank of America, IBM, Halliburton, Eli Lilly, Boston Scientific and Texas Instruments report Monday. On Tuesday, Caterpillar, Coca-Cola, Merck, Schering-Plough, United Technologies, Delta Airlines, State Street, United Health, Lockheed Martin, Norfolk Southern and US Bancorp report. AT&T, Boeing, McDonald's, Wells Fargo, Morgan Stanley and Altria report Wednesday before the bell. After the bell that day, Apple, Yum Brands, Sallie Mae and eBay report. (See more below the chart.)