Bond Expert: Monday Outlook

Prices of Treasury coupon securities have posted small mixed changes in what appears to be a lackluster overnight trading session. Economic data released overnight are mostly indicative of global economic weakness but none of the releases are of the top tier variety. The high profile data will arrive later in the week so today provides a bit of a respite.

The yield on the 2 year note is unchanged at 0.75 percent. The yield on the 3 year note has slipped 1 basis point to 1.11 percent. The yield on the 5 year note is unchanged at 1.51 percent. The yield on the 10 year note has edged higher by a basis point to 2.40 percent. The yield on the Long Bond is unchanged at 3.06 percent.

The 2year/10 year spread has narrowed a basis point to 165 basis points.

In Australia, advertisements for job vacancies fell for the eighth consecutive month in December. Advertising in newspapers and on the net fell 9.7 percent in December after falling 8.6 percent in November. For the entire year advertising for job vacancies plummeted 41 percent.

A friend of the blog has forwarded a piece which notes that advertisers expect significant business retrenchment in the UK this year.

Car sales in China will probably post their slowest rate of gain in eleven years this year as the slumping economy and labor market saps demand.

In India IP unexpectedly rose 2.4 percent in November after falling for the first time in 15 years in the prior month. Car sales in India slipped 7 percent in December.

Russia is experiencing some economic woe as the price of oil slides. The country devalued its currency again and the ruble is at a six year low versus the greenback.

The yen has broken the 90 barrier as risk reduction increases. The dollar has surged against the Euro as the perception that the European economies are behind the curve takes hold.

In the UK, the Brown government has proposed a new stimulus package of just under $1billion.

Today should be a quiet day as the market ponders its next move. The battle should be between the very weak fundamentals and increased debt supply from governments as politicians act to stem the global recession.

At 12:15 PM today, Atlanta Fed President Lockhart will deliver an annual economic outlook for the U.S. at the Atlanta Rotary Club.

At 2:00 PM, Treasury Secretary Paulson will speak on “How markets can help address climate change and other environmental problems” at a conference in Washington D.C.

Repo: Fed Funds ex-open at 0.125%. Fed Effective for 01/09 was 0.12% and Fed Funds closed at 0.125%. The Fed did not drain temporary reserves from the banking system yesterday with reverse repos and has not since the last rate cut. Repo indications for today are Trsy 0.08%, Agy 0.07% and MBS 0.08%.

Libor US$ Fixing 1/12 1/09 Change
OVERNIGHT 0.10375 0.10250 0.00125
1 WEEK 0.24625 0.24750 -0.00125
2 WEEKS 0.28500 0.29250 -0.00750
1 MONTH 0.34250 0.36625 -0.02375
2 MONTH 0.89750 0.96625 -0.06875
3 MONTH 1.16000 1.26000 -0.10000
4 MONTH 1.27250 1.36250 -0.09000
5 MONTH 1.39250 1.48625 -0.09375
6 MONTH 1.50625 1.60000 -0.09375
9 MONTH 1.65500 1.74500 -0.09000
12 MONTH 1.76500 1.85500 -0.09000