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 Fed custody holdings. Following a record $104.5 billion decline in the previous week that stumped observers, U.S. Treasuries held in custody at the Fed for foreign official accounts increased by $32.3 billion — a big swing in its own right. "Although not enough to offset last week's selling, it does show significant adding of exposure and presumably reflects large foreign purchases at the 3s/10s/30s auctions (settled Monday)," says Ian Lyngen, a senior government bond strategist at CRT Capital. "In contrast to the prior week's record decline, we have no reason to believe the $32.2 billion was a custodian transfer and so assume it's simply net purchases — a read that's consistent with the bullish price action in and around the 10s/30s auctions." Fed speakers. A number of Fed officials are hitting the circuit today following Wednesday's FOMC decision that sent interest rates shooting higher. St. Louis Fed President James Bullard speaks on a Brookings panel about nominal GDP targeting at 11:45 AM ET. At 1:45 PM, Dallas Fed President Richard Fisher discusses forward guidance in a speech in London. At 4:30 PM, Minneapolis Fed President Narayana Kocherlakota — the lone dissenter in Wednesday's decision — will speak. Fed governor Jeremy Stein will wrap things up with a speech at 6:30 PM. Markets moving higher. S&P 500 futures point to a positive open and equity indices across Europe are in the green to start Friday's session. U.S. Treasury futures are little changed, and the dollar is down slightly against the euro and the yen. Japanese markets were closed for a holiday on Friday, but the Hong Kong Hang Seng rose 1.2% and the Shanghai Composite advanced 2.7%. A big exception to the market gains is Russia, where stocks are down 2% after Obama's toughened sanctions. Fed stress tests. 29 of America's 30 largest banks passed the Fed's annual stress tests, with the only exception being Zions Bancorporation, a super-regional based in Salt Lake City. Bank of America's and Morgan Stanley's tier-1 leverage ratios came close to the 4% minimum in the "severely adverse" scenario in the test. Record euro zone surplus. The euro zone current account surplus rose to an all-time high of €25.3 billion in January on an adjusted basis from €20 billion in December. The goods trade surplus rose to €15.9 billion from €14.5 billion, and the services trade surplus advanced to €11.8 billion from €9.6 billion. Euro zone consumer confidence. The latest reading on euro zone consumer confidence is due out at 11 AM ET. Economists predict the index rose slightly to -12.3 in March from -12.7 in February. Canadian inflation. The Bank of Canada releases February consumer prices data today at 8:30 AM ET. Economists predict consumer price growth accelerated to 0.6% month over month in February from 0.3% in January, and the year-over-year inflation rate falling to 1.0% from 1.5%. Core consumer price growth is expected to have accelerated to 0.5% from 0.2%, bringing the year-over-year change in core consumer prices to 1.1% from 1.4%. Data dearth. There are no economic data releases scheduled today in the United States. The cycle picks up again on Monday with the release of the Chicago Fed's monthly National Activity Index and the preliminary results of Markit's U.S. manufacturing PMI survey. Over the weekend we also get HSBC/Markit flash China manufacturing PMI data as well. French elections. Another item of interest over the weekend is municipal elections in France. "Although the Socialists may hold on to Paris, the risk is that the prime minister's party is soundly trounced this weekend," says Marc Chandler, head of global currency strategy at Brown Brothers Harriman. "Many will watch how Le Pen's National Front does, which is running around twice the candidates they did in the last municipal elections, as it gears up for the EU Parliamentary elections in May." Turkey blocks Twitter. Turkey blocked access to Twitter for Internet users there on Thursday ahead of upcoming national elections. The government of Turkish Prime Minister Recep Tayyip Erdoğan has been battling allegations of corruption in recent weeks and months, and Twitter has been a key medium for spreading the news. "Twitter and the rest, we will root out all of them. I don't care what the international community says, they will see the power of the Republic of Turkey," said Erdoğan. *** Below is a Q&A with David Keeble, head of fixed income strategy at Crédit Agricole. *** BUSINESS INSIDER: What is the most exciting trade out there right now, in your opinion? DAVID KEEBLE: I'd sell 2-year and 3-year Treasuries. If you look at the spread between the fed funds rate and the 2-year U.S. Treasury, a few months before the Fed hikes rates, you typically see a spread of 175-240 basis points. Currently, that spread is around 32 basis points and I think that a Fed hike is about 18 months out. The 2-year has a lot of ground to cover over the next year or so. The correction won't come smoothly. We're expecting the 2-year to wake up one day and suddenly realize it's mis-priced — just as the 10-year did last year when it jumped 150 basis points in a very short space of time. BI: Which developments in global financial markets, if any, would you flag as most concerning for risk appetite? DK: The Chinese liberalization of product and financial markets. The world's second largest economy is undergoing a revolution and it will be difficult to ensure it is perfectly smooth. BI: Eurodollar shorts got a nice payoff on their record-large positions from yesterday's FOMC meeting. How do you think positioning will evolve between now and the next meeting? DK: My guess is that investors will sell upticks and so we'll gradually build up short positions. However, adverse positioning acts like only a small anchor on a oil tanker. If the economy says that yields need to rise, prices can be marked lower and short positioning won't necessarily have a significant restraining influence. BI: With the March FOMC meeting out of the way, what pieces of new information (e.g. economic data releases, price action in a given market over the next few days/weeks, etc.) do you think have the biggest potential to alter your outlook? DK: On the economic front, I'm looking at the wage data in the payroll report. The hourly earnings spiked up last month perhaps due to a weather effect and Yellen dismissed the signaling content of that move. However, wage growth is the arbiter for the output gap, so I'm looking at it very closely. Otherwise, I afraid of the Ukrainian situation — as everyone is. BI: What do you perceive to be the most misunderstood trend or event in or characteristic of today's markets? DK: The appreciation of the euro, which seems to be ever in defiance of the best predictions. In my understanding, investors have shunned the zone for years but are flowing back on a consistent basis. This is even showing up in the Treasury's TICS data — Americans are buying foreign assets, and Europe would be my guess. I don't think there is much scope left because its been nearly two years of consistent peripheral sovereign spread improvement. As was pointed out to me the other day, Ireland's 10-year yield is 3.07%, compared to the U.S. at 2.78% — which would you sooner buy? | 
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