Bond Expert: Thursday Outlook

Prices of Treasury coupon securities have registered modest losses in overseas trading and the trend of yield curve steepening is still intact.

This is one of those days in which I have been unable to find a stand out story which might be responsible for price movements. There was some bond supply in Europe as the French sold 2 year notes and 5 year notes. Spain sold 6 year bonds and 10 year bonds. The total of those sales was just shy of 12 billion Euros.

Equity markets are mostly higher but the gains are subdued.

The greenback is like a wobbly fighter who just rose from the canvas after a knockdown. It is doing a tad better against the yen and Euro at the moment but spectators agree that it is in for another rough road.

There is quite a bit of economic data today with initial claims and Philadelphia Fed and the NY Empire survey on the docket.

In overnight trading the yield on the 2 year note has climbed 2 basis points to 0.94 percent. The yield on the 3 year note has also climbed 2 basis points to 1.47 percent. The yield on the 5 year note has edged higher by 2 basis points to 2.34 percent. The yield on the 7 year note is a basis point higher at 2.99 percent. The yield on the 10 year note has climbed another 2 basis points to 3.44 percent. The Long Bond trades as if it has some social disease and its yield climbed 3 basis points to 4.30 percent.

The 2 year/10 year spread rests at its recent wide at 250 basis points.

The 10 year/30 year spread is 86 basis points.

The 2 year/5 year/30 year spread is at its richest point in a while at 56 basis points.

Comments

[Macro_Man:]

30yr made a false break out below 4% and got booted back into the trading range of 4.15% to 4 3/8%. A measured move could take it all the way back to 4.50%. With the dollar tanking and the Fed and the govt seeming to turn a blind eye, why would anyone go long 30yr UST until it becomes attractive. Say, 4.50% or higher? That is where we seem to be headed for the moment.

Oct 15 09:44 AM