3:30 pm - Buck Battered: The dollar has been slumming near the lowest level since 8/08/08 with the index nicking around the 74.20 area as the market continues to look for lower rates for an extended stretch. The euro has been knocking around the 1.5150 area with its sights on the 1.5175 level where it will likely run in to some consolidation. The yen has been working near 87.35 on the buck while it tales aim at its best levels going from the beginning of the year while trying to work its way back to the sub-132 on the euro, but also may get caught in range mode into next week, but there is a fairly full calendar in both Japan and Euroland Friday, while the domestic one is empty, so things could get funky (especially in what will be very sparely populated circumstances). Gold continues to chart new highs with spot 1190.10 +20.70) as players look to stash cash into the year end. Crude was able to get a boost as improving data to settle at 77.96 (+1.94) even in the face of supply

2:47 pm - Bumping Better in Dying Volume: The market has been making its way to new highs with the 10-yr tagging 3.256% while the 5-yr tripped through 2.099%. Traders report that there is still plenty reason to buy bonds, things "aren't improving any time soon even as the occasional data points" look a little better (or "less bad"). Others see the 10-yr yield sporting a 4% handle "in the next 12 months." Though the bond market "is the gauge it seems overdone," with "deflation much more of an issue than inflation" and the misplace belief that the housing market will rebound in any meaningful is "just wrong" and that recovery is "years in the making." Gold, is being run-up as a protective store and not necessarily of reflection of any "near term inflation concerns." One astute player says "Have you looked at your wages lately? I'd be doing cartwheels if I was seeing that" 0.1% or 0.2%. Another lifetime dealer notes "all the Elvises have left the building." And they likely won't be back come Friday either

1:36 pm - Backing Off: Trade has slid form the highs with the 10-yr unaboe to take out 3.28% while the curve has been swung well flattened. The market should get some late session late coming buyers into what is for all intents and purposes a 4 day weekend, but will need to see the uptick in particpation stay near the higher end, but it already appears to be depleting. Trade got a solid flurry in flows on the results, while players scrambled to get a piece of the action while traders reported some profit taking out of a couple of funds in the mid-curve.

1:16 pm - Big Bid: Bonds were able to regain some ground onthe heels of a wildly decent auction, with the market having been braced for a much higher yield, but was instead giving thanks for a well lower payout. This offering basically saw the best numbers of the week for by most measures, which improved on the way out the calendar with the 2-yr having been the week's provrbial dog. The bid-to-cover saw the second best since June, and on record in the maturity's shortened life. The 10-yr snapped back to run at the 3.289% yield from 3.341% while the 5-yr swung to 2.11% from 2.165%. The market will use the solid offering to make a stab at the 3.257% point on the 10s.

1:05 pm - Auction Out: Wow of an auction with the $32B 7-yrs seeing a lower 2.835%  with a 2.76 bid-to-cover and an indirect bidder take of 62.5%. Bloomberg TV's Brian Luke just pointed out that traditionally the market is on an early (correct) close on the Wednesday before Thanksgiving, so that may have had some odd-ball impact on the odd-ball duration offering.

12:47 pm - Auction and Data Pressure: Bonds have been edging to new lows on the longer end although the 7-yr is holding in near 2.83% and staying caught in a range for an hour or so, but likely to push back to the 2.845% level ahead of the auction hits. The market is anticipating a decent showing, but there is little chance the offer will see the kind of impressive stats and will almost certainly see a fairly fat tail on the yield concession. The options have seen a bid in the middle of the curve while the wings have been quietly offered. The lack of participation and the is helping to add to the intensity of the pressure with the improved data having dented pre-holiday buying and the record auction keeping things tempered. Traders report some fund buying in the 5-yrs while futures trade is being driven largely by the move out of the December contract, but the front continues to dominate the size trade. Global bonds are mixed, but generally lower on improving economic expectations. The day is focused on the auction now that the data onslaught is out of the way, with the $32B 7-yr bringing up the rear on the week's record $118B run of supply. The next big size will start hitting 12/8 the announcements on the 3-10-and-30-yrs for December hitting next Thursday. The previous, sloppy, smaller $31B offering saw a 3.141% yield with a bid-to-cover of 2.65 and an indirect take of 59.3%. The market was hoping for a better showing and was quite disappointed. The auctions going back to February averaged a 2.53 cover and an indirect take of 49.4%, which will probably not be matched in this outing even as the year end looms. When issued is running 2.865%. The curve has been stalled with the 2-10-yr yield spread running near 258. The dollar remains under pressure with the index scraping around near the 15 month lows, now 74.52 while the euro has made the 1.52 level the new 1.51 ;level, where it will likely fail repeatedly and epically. The yen has been storming higher generally, aiming for 87.13.

12:27 pm - Dollar Debacle: BBH's Marc Chandler reminds..."The dollar has been sold off today and ECB and BOE have added fuel to the fire. They continue to provide dollars to their member banks, who then appear to turn around and sell them. While longer dated dollar repos have largely stopped, the ECB and BOE continue with their one week operations. The SNB had a dollar auction as well, but no bids were turned in. We have argued that among the most successful Fed liquidity facilities were the swap lines offered to a number of foreign central banks. At its peak the Fed provided foreign central banks close to $600 bln. As of last week, these swap lines were less than $30 bln. Recall the sequence of events, during the acute part of the crisis, rather than a surplus of dollars, there was actually a shortage. In the minutes of the Nov FOMC meeting, the Fed suggested that the dollar's recent decline was the unwinding of safe haven flows. We have argued that while there was some safe haven activity, primarily Americans repatriating funds, the real source of demand for dollars was to fund dollar assets of foreign institutions, especially European banks."

12:13 pm - Bills: Treasury to sell $30B 3-mos and $31B 6-mos Monday

11:24 am - Risky Business: The dollar has fallen off to the lowest level in 15 months with the index backing off to 74.40 as risk trade is resumed while the dollar short coverage has slowed and is offering less support as an improved economic outlook dampens safety bids. The euro has been able to mount the 1.50 resistance point to trade to just shy of 1.52 to see the strongest prices since 8/08. The yen is at its best again st the buck in almost a year as risk while flirting with it strongest on the euro on the month as the yen picks up some of the pre-holiday safe haven buyers and positions are squared.  Gold continues to nick up to new highs with the dollar dropping and talk of India buying additional stores (Reuters). Crude has been sold off to the lowest levels since mid-October but has bubbled back into positive territory as an improved global view adds to demand expectations even on the back of rising inventories

 

10:47 am - Mortgage Rates: Freddie reports that 30-yr fixed rate mortgages averaged 4.78% from 4.83%, the lowest since records began in 1971 (Reuters), the 15-yr fell to a record low at4.29% from 4.32% and the 1-yr adjustable was flat at 4.l35%

10:43 am - Agencies: Freddie will sell $1B of 1-mos, $1.5B each of 3-and-6-mos Monday

10:19 am - Drag: Trade is on offer with the UofM sentiment number somewhat improved and a bit better than expectations and accompanied by sliding near and mid-term inflation expectations. The new home sales report was also on the rosier side with the 430K better than anticipated while home prices increased after a prolonged slide. The amount of time a new home sat on the shelf also fell to 6.7 from 7.4

09:59 am - Offered: The market is working the sell side with the next hit of data perched to fall. The day will be weighed on as the record level 7-yrs wait in the wings. While the market was reassured the FOMC would stick with "extreme low" rates for an "extended period" it also was countered as the day's data was showing signs of, if not exactly improving, at least a less rapid deterioration. New homes sales are due and likely to disappoint

08:59 am - Under Pressure: Trade was weak heading in, but hurt further as data hit, while being hampered ahead of the record sized auction. Treasuries were hit on the first dump of the day's data, with the improved initial jobless claims being a large driver as the market obsesses over labor. The mash-up of multi-tasking, inter-related and confused data showed a generally improving picture with income, while flat, at least not falling, the volatile spending report reaching higher while jobless claims fell trailed by the elusive continuing claims drop. The 10-yr is hovering near the 3.325% yield level while the data helped weigh on global bonds as the largest economy tries to feel its way to improvement. The curve was swung well steeper on the first data-slam, taking the 2-10-yr yield spread running back to 260 from the 256.9. The dollar has been slammed with the index collapsing through to 8/08 levels while seeing a similar move on the euro and yen as longer term low rates weigh. The yen has been bid back through to near the month's best levels on the euro

08:29 am - Offered: The market has a full plate today with a huge batch of data and a record $32B 7-yr auction. There will be few participants, however, and the market will be scrambling to match size to the deluge of data. Trade will be hampered by the auction sittiing near the end of the day on The curve is pushig flatter with the 2-10-yr near 257,9. The buck has been offered with the yen at the best levels since January's 87.15. The euro is up to trade near 1.51 having decisively cleared the 1.50 hurdle. personal income and spending, PCE, initial jobless claims, durable orders (8:30), UofM sentiment (9:55ish) and new home sales (10) along with the record $31B 7-yr auction (13)

05:58 am - Treasuries are lower while equities are looking at a higher open. The dollar has hit a 10-month low vs the yen following the release of Federal Reserve minutes. The FOMC stated that reates will remain essentially at zero until mid-2010. The dollar has also broken through the 1.50 level vs the euro. $32 bln in 7-year Notes will be auctioned. Personal Income and Spending data is due at 08:30. Initial Claims for the week of 11/21 and Durable Orders will also be discussed at 08:30. The 2-10-year yield spread is 259 vs 257 from yesterday afternoon.