Bond Expert: Wednesday Outlook

Prices of Treasury coupon securities have sagged modestly in overseas trading. The market has deteriorated under the combined weight of surging equity markets (sapping demand for risk averse assets) and the anticipation of an auction of $19 billion 10 year notes today. For good measure there is also angst regarding an auction of $11 billion 30 year bonds tomorrow.

The yield on the 2 year note has climbed a basis point to 1.31 percent. The yield on the new three year note is unchanged at 1.95 percent. The yield on the 5 year note has edged higher by 1 basis point to 2.88 percent. The yield on the seven year note has climbed higher by 3 basis points to 3.88 percent and the yield on the Long Bond has also moved up by 3 basis points and rests at 4.68 percent.

The 2 year/10 year spread is unchanged at 257 basis points.

The 2 year/5 year/30 year spread cheapened to 23 basis points after closing yesterday at 25 basis points.

There are several pertinent pieces of the economic puzzle available today. The trade balance probably increased to $29.0 billion from $27.6 billion in the prior month. Economists at UBS attribute the small increase to higher prices for imported oil.

There is some budget news today. Some monthly budget data. I am not sure how much focus there will be on the data, but in reading this morning I came across UBS economists' estimates for fiscal 2009. The analysts there forecast a budget deficit of $1.55 trillion (11 percent of GDP) and total net borrowing of $2.015 trillion (14.3 percent of GDP).

The Federal Reserve will release the Beige Book today. It will show that we have slipped off the road to financial perdition and that we are following the yellow brick road to financial nirvana. On a more serious note, I expect that it will chronicle the very slow and gradual improvement in the economy which has happened recently.

Libor set at 0.63875 this morning versus 0.64750 yesterday.

Comments

[robert.b.fe...:]

Because of the court's decission this morning all of the bonds in the U.S,of A public and private have become junk bonds.

Jun 10 09:13 AM

[Bull Run:]

I think the 30 yr. note will be under severe pressure over the next few days, because the price of the 10y. and the 30 yr. has been the same, for the last couple days, so the 30 yr. note has some price adjustsments to make.

Jun 10 09:28 AM

[robert.b.fe...:]

It's doable. Drill here, drill now and control the price of oil.


On Jun 10 05:56 PM petroleo wrote:

> OIl need to be at $10 barrel. I'm tired of funding terrorists with
> petro dollars.
> good articles...
>
> When folks finally see that they can’t just get someone else to pay
> for all this, there will
> likely be a huge tax rebellion which will cause more short term problems,
> but may in the
> long term (hopefully) have the effect of getting the government to
> manage our money better.
>
> good reading: kl.am/tsc finance and econ articles

Jun 10 06:37 PM