A gauge of manufacturing in New York State showed the sector contracted for the third month in a row in August as new orders fell to their lowest level since November 2010, the New York Federal Reserve said in a report on Monday.
Foreigners were net sellers of all U.S. assets in June for a second straight month and bought the fewest long-term securities in more than two years, data from the U.S. Treasury Department showed on Monday.
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT
Overall debt flows were low very low at -$15.35 bn vs. +$35.3 bn in May for the lowest monthly reading since November 2008 -- third largest on record.
Treasury selling was -$4.5 bn (ex-Bills) vs. $37.9 of buying in May -- lowest monthly flows since May 2009. Official selling was -$1.7 bn with the bulk of it in Bills, which saw -$15.4 bn of selling for the most since March 2011, while Treasury Notes/Bonds had +$13.7 bn of buying vs. $21.6 bn in May. Total Private selling (ex-Bills) was an impressive -$18.9 bn vs. Adding of $16.5 bn in May.
Largest Treasury sellers (including Bills) were the Caribbean -$8.9 bn, Canada -$6.5 bn, Russia -$5.4 bn and Brazil -$4.3 bn. Largest purchasers were China +$5.7 bn, Singapore +$4.2 bn, Thailand +$2.8 bn and the UK +$2.7 bn.
Corporate Bonds had -$9.743 bn of private selling vs. +6.2 bn in May. Officials sold, but a much smaller amount at -$691 mn vs. -$377 mn in May.
Agency selling was all Official at -$2.4 bn vs. Private buying of $2.16 bn, a reversal for Privates who sold -$8.8 bn in May.
The bond market is doing very little on the release, with the front-end and the belly continuing to trade well while the long-bond remains under pressure.
TOM SIMONS, MONEY MARKET STRATEGIST, JEFFERIES & CO., NEW YORK
June doesn't look like a particularly strong month. It was the end of QE2. It wasn't clear how that was going to effect Treasury yields,
LINDSEY PIEGZA, ECONOMIST, FTN FINANCIAL, NEW YORK
It looks like we are continuing to see weakness carried over into August. This is the third consecutive negative monthly report. Looking at the components it was a little mixed. We saw some of the key components--new orders, inventories, unfilled orders -- these all continued to decline in August but you did see shipments pick up a little bit. And on the labor front, employees gained momentum so that was a very nice step in the right direction, and we also saw the average work week still negative but again taking a step in the right direction.
Really how I read this is a weaker than expected activity index suggesting continued weakness in manufacturing through August. This is the first of the regional indices but it certainly set a negative tone for the national ISM release, that has been teetering at that break even point.
MILLAN MULRAINE, SENIOR U.S. MACRO STRATEGIST, TD SECURITIES, NEW YORK
I think it's going to sustain what we've seen in a number of other reports. The manufacturing sector may have cooled off significantly -- an indication that it has been deteriorating, while this is just the first of regional indicators, it does a fairly good job of predicting what the others will do... If this is deteriorating, then one will think that others will also have the same magnitude.
Altogether the sentiment has been quite sour, and this falls into that category. We're still somewhat far off from getting into a double dip recession, but it suggests sluggish growth for the next quarter.
STEVE BLITZ, SENIOR U.S. ECONOMIST, ITG, NEW YORK
There is not a lot to say. It speaks for itself. You have a contracting economy in the New York Fed region. In that sense it is certainly a disappointment. It was minus 3.76 last month, so that means that manufacturing got worse, it didn't stabilize.
These numbers month to month can be a little bit volatile so you don't want to overreact.
MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BNY MELLON, NEW YORK
It's a negative report. Our expectation was that it would be about flat. We had a supply shock in manufacturing, primarily auto manufacturing, last spring, and the rebound never materialized in the summer. As late as August, we had further deterioration. Today's data suggests producers are continuing to pare back amid a continued downgrade of the economic outlook.
TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW
There is no way to avoid that this is a weak number. On ISM-weight terms, it still deteriorated. This is consistent with the negative tone that has permeated throughout the markets. Clearly we are not starting the new round of manufacturing data on good footing.
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
Survey respondents of the Empire State Manufacturing Index reported continued deterioration in the manufacturing sector in August, with the headline general business index falling from -3.76 to -7.72. August is the third month the survey has indicated NY conditions facilitative of manufacturing expansion have lessened. National surveys (ISM Manu) have indicated the same weakness in the industry for June and July, and in three weeks, the results of August business conditions look to report another contraction.