Bond Expert: Friday Outlook

Prices of Treasury coupon securities have edged higher in overseas trading as the investing world acts out its monthly version of waiting for Godot as participants anticipate the important US labor report at 830AM New York time. Pundits and paid professional prognosticators posit poor payroll results once again and an unemployment rate soaring to 7.0 percent.

Against that background yield have registered modest declines. The yield on the 2 year note has dropped 3 basis points to 0.79 percent. The yield on the 3 year note has slipped 3 basis points to 1.15 percent. The yield on the 5 year note has dropped three basis points to 1.57 percent. The yield on the 10 year note has also dropped three basis points and it yields 2.41 percent. The yield on the Long Bond has dropped 2 basis points to 3.02 percent.

The 2year/10 year spread has not budged and remains at 162 basis points.

Economic data released overnight generally reflect global economic weakness.

Nippon Steel (NISTY.PK) may respond to weak demand by closing a huge mill early for scheduled maintenance.

Teck Cominco (TCK), Bloomberg reports, is the world’s second largest producer of zinc and that firm has responded to weak demand by eliminating 1,400 jobs.

Bundesbank President Axel Weber said in a speech that the German economy has probably contracted at a faster pace than the central bank had expected. UK manufacturing dropped 2.9 percent in November and 7.4 percent YOY. The pace of the decline is the fastest since 1981.

French Industrial Production sank 2.4 percent from the previous month and has dropped 9 percent YOY. Manufacturing declined 3.1 percent and is down 11 percent YOY.

Auto manufacturing has slumped a chunky 35.9 percent YOY.

On a brighter note, retail sales in Germany rose a greater than expected 0.7 percent from October, which had registered 2.2 percent decline. YOY retail sales are off by 3 percent.

ABX

It has been some time since I have commented on the ABX.

The reason for the comment is that it appears that a bill to allow bankruptcy judges to alter loan balances has picked up a head of steam as Citibank (C) broke ranks with other lenders and no longer opposes the measure.

Dealers reported heavy trading in the various ABX tranches yesterday and lots of cash selling. AAAs were down more than three points and some Penultimate tranches dropped over 4 points.

It would appear that the models by which some of this detritus trades does not have a variable for judicial fiat.

Comments

[donzelion:]

"Pundits and paid professional prognosticators posit poor payroll results once again..."

Pretty painful points proposed. Pundits pandering perilous products may possibly be put out to pasture.

Jan 10 02:05 AM