A jam-packed schedule of economic data next week will give US Treasury investors a bit of respite from the recent onslaught of bond auctions, but Greece's fiscal fortunes may ultimately set the pace of trade. A regional New York manufacturing measure and a key national housing gauge will begin the data deluge on Tuesday, following a three-day weekend due to the Presidents Day holiday in the United States.
Though there are no bond offerings, supply could still cast a shadow over the market with a potentially record-breaking announcement on Thursday for the following week's Treasury note auctions. However, the key market mover could still be Greece's ongoing fiscal tragedy, which has the potential to affect global stocks and demand for safe-haven assets such as Treasuries.
Despite hints of a European rescue effort, traders are still little the wiser on how exactly the European Union plans to save Athens from the wrath of global investors dumping Greek debt, lending support to apparently less-risky Treasuries. "I think Greece will remain an important factor in trading," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
"The market is a little frustrated right now at the lack of a resolution." Euro zone sources preparing for meetings of the region's finance ministers Monday and Tuesday said ministers would not discuss specific ways of supporting Greece. Ministers will focus instead on pressing Athens to implement steps it has promised to cut its budget deficit, the sources said.
The lack of debate on a concrete aid plan suggested European governments remain unable to decide how to stop the crisis from hurting financial markets' faith in the euro zone. New York's Empire State manufacturing gauge gets the ball rolling at 8:30 am on Tuesday with a housing index following at 1 pm. Other releases on housing, industrial output, minutes of the Federal Reserve's latest meeting and measures of price growth will follow throughout the week.
Bond investors will also scrutinise the Treasury's announcement on Thursday of the following week's two-, five- and seven-year notes auctions, as well as its first issue of 30-year inflation-linked debt. This constellation of bond sales has set weekly auction records in the past, most recently peaking at $123 billion in October, which could weigh on the market after this week's $81 billion in offerings drew lacklustre response from investors.
However, analysts said the market was recovering nicely after this week's disappointing auctions, which culminated in Thursday's poorly received 30-year offering. One positive note, they added, was that it appeared that an exceptionally large portion of the 30-year sale had been scooped up directly by longer-term investors rather than buyers who might be looking to redistribute the securities through the secondary market.
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