Bond Expert: Friday Wrap

Prices of Treasury coupon securities continued their recent resurgence today as persistent buying and some less-than-festive economic data fostered a bond- positive attitude. The data forced some who had hesitated to join the Friday fracas.

There have been many agnostics regarding the recent surge in bond prices. Personal spending data I think pushed some of the reluctant buyers over the edge.

That data showed that the savings rate had climbed to 6.7 percent in May from 5.7 percent in April. Recoveries are made of sterner stuff than that.

The yield on the 2 year note declined 2 basis points to 1.09 percent. The yield on the 3 year note declined 5 basis points to 1.60 percent.The yield on the 5 year note dropped 6 basis points to 2.53 percent. The yield on the 7 year note slipped 5 basis points to 3.18 percent. The yield on the 10 year note fell4 basu\is points to 3.50 percent. The yield on the Long Bond declined 4 basis points to 4.30 percent.

The 2 year/10 year spread is 241 basis points.

The 2 year/5 year/30 year spread is 33 basis points. Earlier in the week as traders discounted supply it traded at 9 basis points.

Mortgages lagged swaps by about 7 ticks.

The three month 10 year ATM swaption is 673.

Corporate bond spreads are a couple of basis points wider today.

Campbell Soup (CPB) did price a 5 year bond today and it was a foodfight. The initial talk was T+ 125 and the issue priced at T+87.5 . It is currently 80/75.

Enjoy the weekend.

Comments

[whidbey:]

Stunned by the Fed? There is no assurance that the Fed will do more buying and the jury is still out on what plans the Fed has for its withdrawal from the liquidity trap. We can doubt the future since housing is still critical to jobs and consumption.

We are at a hiatus where the Fed is damned if it does and damned if it does not. In such a dilemma Summers seems a poor choice for Chairman. I sorry for what I said about Ben B.

Jun 26 10:11 PM

[Bernard Thomas:]

We are not even close to recovery. The economy is merely settling on the bottom. The tight spreads of the CPB deal indicate how hungry investors are for "safe" yield. I still don't understand the knuckleheads buying high yield. More and more defaults are coming. Sure, HY has permormed well, but that is because of knuckleheads who continue to plow money into that market creating a self-fulfilling prophecy.

Jun 27 08:49 AM

[msgtb:]

You can keep a hot air balloon in the air until the air cools and this rally is just that a hot air rally. We will see the lows of March if not lower. This is a government directed rally with the traffic cop looking the other way. Look at what GS, JPM are doing. JPM leases and oil tanker and takes delivery of oil and GS runs the price of oil up in the commodities market. Insider trading is rampant and the SEC is doing nothing about it.

Good luck and good trading

Dave

Jun 27 11:10 AM

[MarkitWacha:]

The fundamentals of the global economy point to a higher yield in the long term. It looks to me like investors around the world are petrified once again, in no small part due to the passage of cap-and-trade.

Without any one to stop the increasingly leftist attitude of the legislators, I would assert that it's actually a better idea to pay off your loans these days than to loan anything to the Federal government. Without a better risk/return available, it's time to pay off any and all loans that charge more than 6%, after adjusting for tax benefits. I never thought I'd say that.

Jun 27 11:18 AM