Prices of Treasury coupon securities moved higher today in a languid and lackadaisical trading session. The yield on the benchmark 2 year note has declined by a basis point to 2.64 percent. The yield on the 5 year note has dropped 4 basis points to 3.37 percent. The yield on the 10 year fell 6 basis points to 3.98 percent and the yield on the 30 year bond tumbled 7 basis points to 4.53 percent.The 2 year/10 year spread is flatter by 6 basis points and is closing the day at 134 basis points.
The 2 year /5 year/30 year spread is 43 basis points.
Once again I note that the level of activity was subdued . Dealers were looking ahead to next week with quarter end and a shortened trading time frame with next Friday the July 4th holiday. The Labor Department is set to announce the monthly employment series on Thursday so that will make for some possibly very hectic trading in that abbreviated session.
I have noted several times that I have been long the 2 year part of the Treasury curve via the ETF SHY. I sold that position out to today and I am once again flat. I bought the position with the 2 year note at around 2.90 percent. To be honest, I would not have sold out of the position but when my father turned very ill the SHY became less important for me. I am told the 2 year traded back to 3.10 percent. I sold out today with the issue close to 2.60 percent. That is a nearly 50 basis point run. I feel as though I got a reprieve from the governor and with the issue lagging today, profit taking seemed appropriate.
I think that the stock market is oversold and is due for a healthy bounce. If I am correct on that (a big if), then there should be an opportunity to buy Treasury paper 10 basis points to 15 basis points cheaper than current levels.