Bond Expert: Thursday Outlook

Prices of Treasury coupon securities are posting very minimal changes in overnight trading. The yield on the 2 year note has increased a solitary basis point to 0.95 percent. The yield on the 3 year note has also edged higher by a basis point to 1.23 percent. Each of the other benchmark issues is dramatically unchanged. The 5 year note yields 2.31 percent. The 7 year note yields 2.93 percent. The 10 year note yields 3.30 percent and the Long Bond rests at 4.05 percent.

The 2 year/10 year spread is 235 basis points. It is a basis point flatter overnight but that follows a 7 basis point or so steepening yesterday.

The 10 year /30 year spread is unchanged at 75 basis points. Before I left Across the Curve global headquarters yesterday in suburbia for the concrete and steel canyons of Manhattan, that spread had traded at 72 basis points.

The 2 year/5 year/30 year spread is 38 basis points this morning. That is on the rich end of the recent range. I can not read my copious notes but I think that it began the day yesterday at 31 basis points.

There is quite a bit to digest today with a plethora of economic data to analyze and digest.

We receive the monthly data on manufacturing from ISM. The consensus expects a rise to 54.0 from 52.9 in the preceeding month. There are some doubts about that because of the weakness in the Chicago survey yesterday.

We receive the weekly claims data today. This is the most contemporary of all indicators and the consensus posits an increase to 535K from 530K in the prior week.

Consumption probably posted a gain of about 1.0 percent after rising 0.2 percent in the prior month. Core inflation should remain quite subdued around the 0.1 percent levels.

Paid prognosticators and professional pundits also posit a pusillanimous posting for construction spending with a decline of 0.2 percent expected following a 0.1 percent decline in the prior month.

Car sales probably ran at an annual rate of 9.3 million units in this clunker-free month. With clunker driven sales the prior month was 14.1 million in August.

The Treasury will announce another batch of supply today for auction next week. It will be a round of 3 year, 10 year and 30 year paper which will total around $70 billion.

Separately, there will be a 10 year TIPS auction which should total around $8 billion.

The 10 year note is trading near the top of the trading range. One has been paid to trade the range and especially so in advance of supply. I think I would hold my fire until late in the day. It is just a feeling but I think we take a stab at higher prices and lower yields before this is over.

I also think that traders will prefer to sell tomorrow no matter what prints from the Labor Department. It is a more comfortable sale as the uncertainty is cleared away with the release of the data.

Comments

[Tony Petroski:]

"Paid prognosticators and professional pundits also posit a pusillanimous posting for construction spending with a decline of 0.2 percent expected following a 0.1 percent decline in the prior month."

Mr. Jansen can generally be counted on to generate generous and not generic genuine insights on...bonds... Can't bonds become geonds?

This is bond talk at its best. I missed yesterday's post.

Oct 01 09:09 AM

[Tony Petroski:]

Mr. Jansen. I trust all is well?

Oct 02 06:55 PM