Bond Expert: Wednesday Outlook

Prices of Treasury coupon securities declined in overnight trading as the euphoria which drove the market yesterday subsides in favor of a sober assessment of the huge borrowing needs of the Treasury. The appetite of the Treasury is gargantuan, and in an environment in which risk is shunned, dealers will seek opportunity to sell that supply.

The yield on the 2 year note has climbed 6 basis points to 1.43 percent. The yield on the 5 year note has jumped 7 basis points to 2.60 percent. The yield on the 10 year note has moved higher by 8 basis points to 3.80 percent and the yield on the Long Bond increased 4 basis points to 4.23 percent.

The 2 year/10 year spread has reversed some of the narrowing which occurred yesterday and is 2 basis points wider this AM at 237 basis points.

Equity markets surged in Asia on the Obama victory but have retreated in Europe as concerns about the deteriorating economy overshadow the historic Obama victory.

Futures markets indicate that the US market will post moderate losses when trading begins in about two hours.

The Treasury will announce its refunding package this morning and will provide important information about its future borrowing plans.

The ADP will release its monthly estimates on the job market. It has not been an especially reliable indicator.

IG11 Open

The  IG 11 is opening about 1 1/2 wider at 183. One dealer whose commentary I receive but can't publish expects a push down to the 175 level on short covering. At that level he would expect spreads to move wider again.

Full Libor Chart

Libor US$ Fixing
11/05 11/04 Change
OVERNIGHT .32250 .37500 -.05250
1 WEEK .93625 .98125 -.04500
2 WEEKS 1.23750 1.32500 -.08750
1 MONTH 1.95625 2.17750 -.22125
2 MONTH 2.41250 2.60625 -.19375
3 MONTH 2.50625 2.70625 -.20000
4 MONTH 2.62500 2.79250 -.16750
5 MONTH 2.72375 2.87375 -.15000
6 MONTH 2.82375 2.96875 -.14500
9 MONTH 2.90250 3.04000 -.13750
12 MONTH 2.96875 3.10500 -.13625