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Prices of Treasury coupon securities are registering virtually no change in overnight trading.

As I peruse the news, there is not one story which jumps out and grabs me as particularly pithy. And I guess I am not alone as the US bond market manifests virtually no movement.

An examination of various small pieces of data does yield, I think, one theme at least in the overnight trading. It appears that risk reduction is a minor theme overnight.

European equity futures are posting declines , albeit modest ones. The futures market indicates that the US stock market will open with a modest decline.

The dollar has gained against the Euro and has slipped versus the yen. The dollar and the yen are repositories of risk and that slippage indicates a modicum of risk reduction is underway at least for this one session. I also note that gold has declined modestly as has oil.

If that mentality lasts for more than a day, it will redound to the everlasting benefit of the US taxpayer next at which time my close personal friends at the US Treasury will offer $115 billion in 2 year notes, 5 year notes and 7 year notes to the unsuspecting investors.

As we turn the pages on the calendar and careen towards year end, I suspect that there should be more risk aversion in front of us. Anyone who has had the prescience to own various types of spread product this year has made piles of money.

Prudence would dictate that some choose to monetize a portion of those profits as traders lock in the potential for a shiny Porsche or a share of a slug of weekends in the Hamptons.

There has also been a bit of an epiphany regarding Federal Reserve policy. I think that the Bernanke speech was very dovish and it resonated with the skeptics in the class. I think that a reasonable chunk of the unbelieving have shifted to the view that the extended period will be quite extended and the initial beneficiary of that change of heart will be the 2 year note which will be attractive versus shorter expensive paper.

With the supply announcement later today we will have the forward rolls into the WI issues. One set of analysis which I have observed suggests rolls of about 6 basis points on the 2 year note, 5 basis points on the 5 year note and 4 basis points on the 7 year note.

The yield on the 2 year note is dramatically unchanged at 0.745 basis points. The yield on the 3 year note is unchanged at 1.27 percent. Likewise the yield on the 5 year note is unchanged at 2.19 percent and the 7 year is unchanged at 2.89 percent. The yield on the 10 year note has slipped a basis point to 3.36 percent and the yield on the Long Bond has edged lower by a basis point to 4.29 percent.

The 2 year/10 year spread is a basis point narrower at 262 basis points.

The 10 year/30 year spread is 93 basis point. I still love being long 30s versus 10s at this spread as I think that the belly will cheapen versus the wings for the supply event next week.

The 2 year/5 year/30 year spread begins this day at 65 basis points.

Source: Bond Expert: Thursday Outlook