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Prices of Treasury coupon securities have posted modest gains in overnight trading. The yield on the benchmark 2-year note has slipped 3 basis points to 2.32 percent. The yield on the 5-year note has dropped 2 basis points to 3.08 percent. The yields on the benchmark 10-year note and 30-year bond have also declined by 2 basis points to 3.80 percent and 4.53 percent,respectively. The 2-year/10-year spread has widened 1 basis point to 148 basis points.

I am not quite sure why bond prices have posted the aforementioned gains in the overnight session. There is a European consumer confidence reading and that fell to a 2 ½ year low. In equity market news General Motors posted a multibillion dollar loss in the most recent quarter and attributed a large portion of the loss to losses at its financial unit. And Citigroup (NYSE:C) is busy throwing current shareholders under the metaphorical bus as it once again issues new shares to replenish capital depleted by some horrific risk management.

So maybe the backdrop against which trading takes place is still riddled with fear. Fear that mortgage losses are ongoing and fear that the credit crunch will severely impinge on economic activity worldwide. That idea has worked since January 2007 so I guess if one is going to lose money trading it would be best to have placed that bet.

For now I will stop and await the data as it begins to flow in about an hour.

Source: Bond Expert: Wednesday Outlook