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Prices of Treasury coupon securities tumbled today as someone magically flicked the “risk switch” to on today and risk assets prospered whilst risk averse assets languished. The headwind of seven year note supply ($31 billion) and the consumation of a week in which the Treasury regurgitated $123 billion in securities weighed on sentiment, too.

I think the main factor driving prices today was the flight to riskier assets. The dollar weakened against most other currencies as the safe haven bid into the currency faded.

Along with the foreign currencies, commodities rallied as oil and gold enjoyed healthy gains.

In the same way, corporate bond spreads narrowed, as did Emerging Market spreads.

Flows in the Treasury market were mixed. I did hear of insurance company buying as well as hot money sellers of 5s, 7s and 10s. The sloppy 7 year result cheapened the WI 7 year and forward rollers working their crude abacuses decided it was a propitious moment to roll. Others reported various extension trades in advance of the month-end index extension tomorrow.

The yield on the 2 year note increased 4 basis points to 0.98 percent. The yield on the 3 year note climbed 6 basis points to 1.50 percent. The yield on the 5 year note also increased 6 basis points to 2.43 percent. The yield on the 7 year note surged a lucky 7 basis points to 3.07 percent. The yield on the 10 year note increased 7 basis points, too, to 3.49 percent. Seven basis points worked for the Long Bond as its yield surged 7 basis points to 4.33 percent.

The 2 year/10 year curve steepened 3 basis points to 251 basis points.

The 10 year/30 year spread is unchanged in quiet professional trading at 84 basis points.

The 2 year/5 year/30 year spread narrowed a basis point to 45.

Source: Bond Expert: Thursday Wrap