Prices of Treasury coupon securities posted solid gains in overnight trading as fear set in that the spate of data set for release this morning will show a deepening contraction.
The yield on the 2 year note has slipped 6 basis points to 1.12 percent. The yield on the 3 year note has dropped 5 basis points to 1.37 percent. The yield on the 5 year note has tumbled 11 basis points to 1.98 percent. The yield on the 10 year note has dropped 9 basis points to 3.01 percent and the yield on the Long Bond has dropped 8 basis points to 3.54 percent.
The 2 year /10 year spread has narrowed by 3 basis points to 189 basis points.
As I mentioned above, there is a heavy docket of economic information today. At 8:30AM the Commerce Department will release Durable Goods orders and the Labor Department will release the weekly Initial Claims Data. At the same time traders will have an opportunity to digest the important information on personal income and spending.
A little later, at 10:00 AM, the reports on New Home Sales and a separate report on the Chicago manufacturing sector by the Chicago Purchasing managers will be available.
In the aggregate this data should serve to reinforce the notion that the economy is mired in a deep recession.
Equity markets around the globe are manifesting weakness in advance of the data surge. European markets are down about one percent. The Nikkei declined a little more than one percent and the Australian market slipped a little more than 2 percent. The Hang Seng bucked the trend and rose more than 3 percent as the Chinese government slashed rates in an attempt to revive the economy.
Tomorrow is Thanksgiving Day in the US and trading in the bond market will end at 200PM New York time. I believe the market will close at that time on Friday when trading resumes.
