Bond Expert: Wednesday Outlook

Prices of Treasury coupon securities have posted modest gains in overnight trading as fears about the severity of the global economic downturn trump the mountain of debt that the Treasury is issuing this week.

Against that background, the yield on the 2 year note slipped 3 basis points to a cycle low of 1.21 percent. The just-minted three year note upon which the ink is still wet edged lower in yield by 4 basis points to 1.71 percent. The yield on the 5 year note declined 3 basis points to 2.45 percent. The yield on the 10 year note dropped 3 basis points to 3.72 percent. The yield on the 30 year bond is unchanged at 4.19 percent.

The 2 year/10 year spread is 251 basis points.

There is no meaningful economic data today and the bond market will focus on underwriting the final legs of the refunding package. Today the Treasury will visit the market (hat in hand) to raise $20 billion via an auction of 10 year notes. In the final leg tomorrow, the Treasury will sell $10 billion 30 year bonds.

Overnight the news is mostly downbeat, but to a market assaulted recently by bad news there is no smoking gun in the pile.

China bucked the trend and reported robust retail sales, which jumped 22 percent and allayed some fears about growth in the important economy.

In Australia, consumer sentiment rose 4.3 percent to 85.3 as consumers responded favorably to rate cuts and fiscal stimulus.

Bloomberg quotes Bank of England Governor King as stating that he is prepared to slash rates again to prevent recession from morphing into a deflationary event.

Bloomberg publishes a Professional Global Confidence survey and it climbed slightly to 6.6 from 4 in October. A reading below 50 indicates that pessimists outweigh the optimists, so the dour group is crowded at the moment.

Bloomberg also reports that unemployment in the UK rose at the fastest pace in 16 years in October.

This has been a light data week in the US. That will end tomorrow and Friday with initial claims and retail sales on the docket Friday.

IG11

The initial quote I have received on the IG 11 is wide but real at 192/197. That according to the missive I received is about 8 wider.

Libor

Libor US$ Fixing
11/12 11/11 Change
1 WEEK .84000 .80250 .03750
2 WEEKS 1.04000 1.04375 -.00375
1 MONTH 1.40875 1.47750 -.06875
2 MONTH 2.01625 2.04625 -.03000
3 MONTH 2.13250 2.17500 -.04250
4 MONTH 2.27375 2.30625 -.03250
5 MONTH 2.39125 2.42375 -.03250
6 MONTH 2.52500 2.54500 -.02000
9 MONTH 2.60750 2.62375 -.01625
12 MONTH 2.68250 2.70750 -.02500

Comments

[Pipo:]

Jim Rogers said today in Seoul, "bonds will be a very bad investment in the next 10 to 20 years".

He is worried about government overspending and inflation down the road.

www.jimrogers-investme...

2008 Nov 12 10:19 AM

[dr.doolittle:]

I thought unemployment claims were coming out today? One question: do you think there is a limit to the amount the US Federal Government can borrow?

2008 Nov 13 12:36 PM