Fixed Income Focus: Refunding Auctions Review/Preview
The belly of the curve led Treasury yields lower this week. The price action was again driven primarily by the ebbs and flows of any daily safe-haven activity related to movement in risk assets - primarily oil and equities, as well as renewed pressure on high yield debt.
Treasury debt managers will come to market with a $62.0 billion three-part Refunding package during the week ahead. The Refunding auctions will consist of a $24 billion 3-year note auction on Tuesday, a $23 billion 10-year note auction on Wednesday, and a $15.0 billion 30-year bond auction on Thursday. The bidding deadline will be 1:00 PM for all three auctions. The auctions will all settle on Tuesday, February 16th.
Fixed Income Focus
US Economic Chartbooks
Please see our Economic Week Ahead Chartbook for a discussion of next week's economic releases provided in a visually friendly format that includes graphs, brief descriptions of SMR's forecasts, and links to detailed data previews. If you missed anything from last week, see our Economic Week in Review Chartbook for a look back at the releases with links to full analyses.
January Employment Analysis
(1) January Payrolls increased 151,000
(2) November/December Payrolls revised downward by only 2,000
(3) Benchmark Revision -206,000 almost identical to Preliminary Estimate
(4) Unemployment Rate down to 4.9%
(5) Overall January data upbeat despite Headline Shortfall
(6) Hours/Earnings Solid
A Review of Q4 Data on Households and Renters
--Household formation slowed in the fourth quarter, based on the latest Housing Vacancies and Homeownership Survey (HVS).
--The homeownership rate ticked up slightly in the fourth quarter and appears to have stabilized.
--Rental vacancy rates also appear to have found a bottom.
--Rents, meanwhile, continue to increase. In most regions, increases in rents in 2015 outpaced gains in income.
Fixed Income Focus: Refunding Announcement Preview - Make Way For Bills
Treasury yields were lower this past week despite modest improvement on the week in equity and oil prices. Markets were without significant direction for much of the week, finally calming after a very volatile start to the year, before rallying late after the surprise Bank of Japan rate cut.
Treasury will announce borrowing projections for the next two quarters and details of the February refunding next week. We estimate first quarter borrowing needs of $239.9 billion, up from our preliminary estimate of $216.9 billion. In order to accommodate increased bill issuance, we look for Treasury to cut the sizes of all coupon auctions, with larger cuts in intermediate notes. We also think Treasury will announce plans to sell 2-month bills.
Fixed Income Focus