Market update electricity off peak hours

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• U.S. Treasuries ended the week on a higher note with the belly of the curve showing relative strength. The Friday affair was fairly quiet, as Treasuries started the day with modest gains, hitting highs during the opening 90 minutes of the cash session. However, today’s advance represented the third consecutive day of solid gains amid growing political uncertainty in Europe. In Italy, Prime Minister-designate Giuseppe Conte has yet to form a cabinet with reports pointing to uncertainty whether euroskeptic Paolo Savona will be named economy minister. Meanwhile in Spain, opposition parties have taken aim at Prime Minister Mariano Rajoy after 29 people related to Mr. Rajoy’s party were convicted of corruption-related offenses on Thursday. The developments underscored the relative attractiveness of U.S. Treasuries in the face of aggressive net short positioning. This week’s rally lifted the 10-yr note and the 30-yr bond to their best levels since late April while the 30-yr yield settled just below its 50-day moving average (3.10%).

• New orders for durable goods declined 1.7% (Briefing.com consensus -1.6%) in April after increasing an upwardly revised 2.7% (from 2.6%) in March. Excluding transportation, orders increased 0.9% (Briefing.com consensus +0.6%) in April after increasing an upwardly revised 0.4% (from 0.0%) in March.

• The key takeaway from the report is that it will factor as a positive input for Q2 GDP forecasts since shipments of nondefense capital goods, excluding aircraft, rose 0.8%. It also conveyed a modest pickup in business spending, evidenced by the 1.0% increase in new orders for nondefense capital goods, excluding aircraft.

• Wednesday: weekly MBA Mortgage Index (prior -2.6%) at 7:00 ET; May ADP Employment Change (prior 204K) at 8:15 ET; Q1 GDP – Second Estimate (prior 2.3%), Q1 GDP Deflator – Second Estimate (prior 2.0%), April Advance International Trade in Goods (prior -$68.0 bln), and April Advance Wholesale Inventories (prior 0.5%) at 8:30 ET; and April Fed Beige Book at 14:00 ET

• Thursday: April Personal Income (prior 0.3%), Personal Spending (prior 0.4%), PCE Prices (prior 0.0%), PCE Prices – Core (prior 0.2%), weekly Initial Claims (prior 234K), and Continuing Claims (prior 1741K) at 8:30 ET; May Chicago PMI (prior 57.6) at 9:45 ET; April Pending Home Sales (prior 0.4%) at 10:00 ET; weekly natural gas inventories (prior +91 bcf) at 10:30 ET; and weekly crude inventories (prior +5.8 mln) at 11:00 ET

• Friday: May Nonfarm Payrolls (prior 164K) at 8:30 ET, Nonfarm Private Payrolls (prior 168K), May Unemployment Rate (prior 3.9%), Average Hourly Earnings (prior 0.1%), and May Average Workweek (prior 34.5) at 8:30 ET; May ISM Index (prior 57.3) at 10:00 ET; April Construction Spending (prior -1.7%) at 10:00 ET; and May auto (prior 3.90 mln) and truck (prior 9.28 mln) sales to be reported throughout the day

• U.S. Treasuries ended Thursday on a higher note with the long bond pacing the day’s advance. The outperformance in the 30-yr bond pressured its yield to 3.13%, just three basis points above its 50-day moving average (3.10%). Treasuries started the cash session on a higher note, and continued rising after President Trump called off the planned meeting with North Korea‘s Kim Jong-un, citing aggressive rhetoric from North Korea‘s foreign ministry. The advance continued until mid-morning action when Treasuries notched session highs and embarked on a slow retreat from their best levels of the day. Today’s $30 billion 7-yr Treasury note auction was met with very good demand, stopping through the when-issued yield of 2.935% by 0.5 bps. Tomorrow’s session will feature a heavy dose of central bank speakers. ECB executive member Benoit Coeure will speak at 9:15 ET, followed by Bank of England Governor Mark Carney and Fed Chairman Jay Powell both set to begin speaking at 9:20 ET. Bundesbank president Jens Weidmann, who is a potential successor to ECB President Mario Draghi will deliver remarks at 15:20 ET.

• President Trump sent a letter to North Korea‘s Supreme Leader Kim Jong-un, noting that the cancellation of the June 12 summit is being made due to "tremendous anger and open hostility" displayed in a statement made overnight by an official from DPRK’s foreign ministry

• Existing home sales decreased 2.5% month-over-month in April to a seasonally adjusted annual rate of 5.46 million (Briefing.com consensus 5.57 million) from 5.60 million in March. Total sales were 1.4% lower than the same period a year ago.

• The key takeaway from the report remains the same: notable supply constraints continue to act as a drag on overall sales. The limited inventory — and the high prices on available inventory — is crimping affordability, particularly for first-time buyers; moreover, all prospective buyers are going to feel added affordability pressures from rising mortgage rates.