Bond Expert: Friday Wrap

Prices of Treasury coupon securites ended the day with a bifurcated result as longer maturities flourished while shorter dates languished.

I think that theme in the capital markets today was risk reduction and the outcome in the Treasury market reflects that. Over the course of this week bond yields rose and the yield curve steepened.

The opposite outcome unfolded today as yields fell and the curve flattened. The yield on the 10 year note declined 4 basis points to 3.42 percent and the yield on the 2 year note increased 2 basis points to 0.97 percent. In so doing the yield curve narrowed 6 basis points to 245 basis points.

The yield on the Long Bond declined 5 basis points to 4.25 percent and the 10 year/30 year spread narrowed a basis point to 83 basis points.

For the record here are the other benchmark Treasury securities with the closing yield and change on the day. The yield on the 3 year note climbed a basis point to finish at 1.50 percent. The yield on the 5 year note slipped 2 basis points to 2.35 percent. The yield on the 7 year note dropped 4 basis points to 3.00 percent.

There was risk reversal in other markets,too.

TIPS had outperformed nominal bonds throughout the week and they are lagging by several basis points today.

Equities have posted one year highs this week (without the participation of your author) and they took a respite from their steady climb on the stairway to financial heaven.

I watch the mighty greenback via the Euro and the yen. The dollar is posting gains, albeit small ones versus those currencies.

The price action today is positive as the market held the back end of the range in the 10 year note. For now we remain safely ensconced in the 3.50 percent to 3.30 percent trading range.

Comments

[User 498839:]

I am a rookie here, so help me out.

I think that theme in the capital markets today was risk reduction and the outcome in the Treasury market reflects that. Over the course of this week bond yields rose and the yield curve steepened.

If yields rose, that means prices fell, so people sold off bonds. How does that equate to risk reduction? Shouldn't that be embracing risk by pulling out of these safe securities?

thanks!

Oct 16 06:18 PM

[John Jansen:]

The next line says:

The opposite outcome unfolded today as yields fell and the curve flattened

On Oct 16 06:18 PM User 498839 wrote:

> I am a rookie here, so help me out.
>
> I think that theme in the capital markets today was risk reduction
> and the outcome in the Treasury market reflects that. Over the course
> of this week bond yields rose and the yield curve steepened.
>
> If yields rose, that means prices fell, so people sold off bonds.
> How does that equate to risk reduction? Shouldn't that be embracing
> risk by pulling out of these safe securities?
>
> thanks!

Oct 16 06:21 PM

[User 498839:]

Apparently I need to read more carefully....thanks

On Oct 16 06:21 PM John Jansen wrote:

>
> The next line says:
>
> The opposite outcome unfolded today as yields fell and the curve
> flattened
>
> On Oct 16 06:18 PM User 498839 wrote:

Oct 16 06:55 PM