Bond Expert: Thursday Outlook

Prices of Treasury coupon securities are registering small mixed changes in overnight trading. Equity markets around the globe declined in sympathy with the steep drop in US stocks as well as in recognition of a welter of reports which indicate unabated global economic weakness.

The yield on the 2 year note is unchanged at 0.80 percent. The yield on the 3 year note slipped 2 basis points to 1.14 percent. The yield on the 5 year note dropped 2 basis points to 1.64 percent. The yield on the 10 year note fell 1 basis point to 2.48 percent and the Long Bond is unchanged at 3.04 percent.

The 2 year/10 year spread narrowed a basis point to 168.

The 2 year/5 year/30 year spread is 56 basis points.

Investors in the US will brace themselves for the final onslaught of supply as the Treasury will reopen the 10 year note and offer $16 billion of bonds.

The Labor Department releases the weekly claims data at 830AM New York time. The series should jump back above the 500K mark and should render last week's plunge meaningless.

As always, there are a reasonable number of economic reports to sift through in the morning. The preponderance of the data is quite weak or indicates an economy at risk.

Maquairie, the largest Australian investment bank, has said that it faces an ”extremely challenging” environment and is preparing by shedding assets and husbanding deposits.

In another tidbit, Australia permits to build or renovate homes fell 12.8 in November and 34.7 percent YOY.

TDK (TDK), a Japanese company that manufactures magnetic headers for disk drives, will lose money for first time in several years and will slash 9000 jobs.

Lenovo (LNVGY.PK), a Chinese computer company, will lose money for the first time in 7 years and will cut its headcount by 11 percent.

An index of executive and consumer confidence in Europe dropped to 67.1 in December from 74.9 in the prior period. At this level it has sunk to its lowest level since its inception in 1985.

Euro area unemployment rose to 7.8 percent in November from 7.7 percent in the prior period.

German exports plummeted 10.6 percent in November as they recorded their steepest drop since reunification in 1990. The German government failed to cover a 10 year Bund auction Wednesday and one reader mentioned this in a comment an unrelated post.

Bank of England has reduced rates by 50 basis points to 1.50 percent.