Bond Expert: Thursday Wrap

Prices of Treasury coupon securities posted gains today in spite of a $29 billion 7 year note auction. The gains occurred at the end of a triduum in which the Treasury successfully sold $112 billion worth of securities.

Several factors worked in favor of lower bond yields today.

The wobbly equity market played a role as it turned decisively lower yesterday afternoon and continued lower today. It did finish well off the worst levels of the day, however.

I think that many bond investors expect another October tempest in equities especially after that market's long race from the bottom.

Other bond investors hold the view that the economy will post rosy results in the current quarter and in the final quarter of the year but those same folk believe those results are not sustainable.

Retailer Bed Bath and Beyond (BBBY) reported a stellar quarter today but in its statement noted that the gains resulted from expense control. The company expects the environment to remain challenging. That store is a mecca for middle class America and unless the labor market improves the environment will be challenging for quite some time.

Existing home sales slipped today and snapped a streak of four consecutive monthly gains. That led to some buying by the bond bulls.

The market is in the middle of the recent broad 3.50 to mid 3.20s range on the 10 year note. Participants expect that the 10 year note will glide toward 3.30 and then owners will be forced to call red or black.

The yield on the 2 year note has edged lower by 2 basis points to 0.94 percent. The yield on the three year note declined 3 basis points to 1.43 percent. The yield on the 5 year note slipped 4 basis points to 2.36 percent. The yield on the 7 year note declined 4 basis points to 2.99 percent. Likewise, the yield on the investment grade 10 year note dropped 4 basis points to 3.38 percent. The yield on the Long Bond declined 3 basis points to 4.17 percent.

The 2 year/10 year spread narrowed 2 basis points to 244 basis points.

The 10 year/30 year spread widened a basis point to 4.17 percent.

The 2 year/5 year/30 year butterfly improved 3 basis points to 39 basis points.

Corporate bonds

(3:11pm ET) Corporate bond spreads are wider by 2 basis points to 5 basis points today. Salesmen still report underlying demand and participants repeat the refrain that demand is quite strong. There might be a 10 basis point or 15 basis point hiccup, but no one with whom I converse posits any chance of a rout.

There was quite a bit of issuance again today.

Some of this might be off a bit as some of this stuff is from earlier in the day but it is my best information as I write at 250PM.

Viacom (VIA) has $550 million for sale. I do not have a breakdown but it is my favorite 6 year maturity and a reopening of an existing 10 year security.

Enterprise (EPE) is a pipeline company of which I had never heard until today. They are well known enough to raise a cool billion dollars for 10 years and 30 year at spreads right around 200 basis points.

Kroger (KR) priced $ 500 million 6 years at 158 and they are bid in the low 150s.

Another entity with which I lack any familiarity is something with the appellation Holcim Ltd. (HCMLF.PK). That entity was proposing a benchmark 10 year issue.

Wells Fargo (WFC) sold $2 billion 5 year notes at 145.