Overnight economic data 24 June 2011 (Friday)

US Treasury prices rise on disappointing economic data
US initial jobless claims report is weaker than expected
New home sales in the US fall less than forecast in May
Fitch upgrades the Philippines’ rating to BB+ from BB

US Treasury notes rose across the board on Thursday following weak economic data. Initial jobless claims were weaker than expected and although new home sales fell less than expected, they still remain low. Newswires reported that the European Union and the International Monetary Fund had endorsed measures proposed by Greece as part of a EUR 78 bn austerity package. However, concerns remain about Greece’s ability to pass these measures next week (28 June) in parliament. Treasury prices were also given a boost following news that members of the International Energy Agency (IEA) would release 2 million barrels of oil a day for 30 days beginning next week to help offset a Libyan supply disruption. This is only the third time that the IEA has used its emergency reserves since the agency was founded in 1974.

US Treasury 2Y notes rose 1.75/32 to yield 0.344% (versus 0.372% on Wednesday), while 5Y notes were up 12.75/32 to yield 1.458% (1.541%). 10Y notes rose 19.50/32 to yield 2.913% (2.983%). 30Y bonds were up 25.75/32, yielding 4.169% (4.215%). The VIX volatility index closed at 19.29 compared to 18.52 on Wednesday. August crude oil futures fell USD 4.39 to USD 91.02. Spot gold fell USD 27.55 to USD 1,521.40 a troy ounce, while COMEX gold for August delivery was down USD 32.90 to USD 1,520.50 a troy ounce.

The US Labor Department reported initial jobless claims of 429,000 for the week ended 18 June, higher than the 415,000 expected according to a Bloomberg survey. The previous week’s figures were revised upwards to 420,000 from 414,000. The four-week moving average of weekly claims, a less volatile number, was unchanged from the previous week at 426,250. Continuing claims for the week ended 11 June came in at 3.70 million, higher than the 3.67 million expected and unchanged from the end of the previous week.

The US Commerce Department reported that new home sales in the US had fallen to an annual pace of 319,000 in May, down 2.1% from 326,000 in April (revised up from 323,000 reported previously). This is better than market’s expectation for a reading of 310,000. The supply of new homes fell to 6.2 months in May from 6.3 months in April, based on the current pace of sales. The report also shows that the median sales price decreased to USD 222,600 in March, down 3.4% on an annual basis.

The JP Morgan EMBI Global Diversified Index closed at 567.08 compared to 568.45 on Wednesday. The JP Morgan EMBIGD sovereign spread widened by about 10 basis points (bp) to 305 bp.

Fitch Ratings has upgraded the Philippines' rating to BB+ from BB with a stable outlook. Fitch said that the upgrade reflected progress on fiscal consolidation against a track record of macro stability, broadly favorable economic prospects and strengthening external finances. The agency said that sustained strengthening in the revenue/GDP ratio, combined with structural reforms to boost investment and growth, would boost its prospects for further upgrades. Fitch's rating action follows last week's Moody's upgrade of Philippines' rating to Ba2 from Ba3. Fitch now rates the Philippines one notch higher than S&P and Moody's ratings.

Today, The US Commerce Department will announce May durable goods orders (+1.5% month-on-month expected) and the third and final GDP report for Q1 2011 (+1.9% expected).