Bond Expert: Friday Wrap

Aug. 1.08 | About: iShares TIPS (TIP)

Prices of Treasury coupon securities have nudged themselves infinitesimally higher in a day significant by lack of activity. For a day on which the much anticipated labor data printed, the result was an anticlimax.Yields are the slightest bit lower. The benchmark 2 year note yields 2.51 percent. The 5 year note yields 3.23 percent. The benchmark 10 year issue yields 3.95 percent and the Long Bond yields 4.57 percent.

The 2 year/10 year spread is 144 basis points. I believe that spread will widen markedly into the supply next week. It is puzzlesome that it did not leak wider today, but I suspect that there might be some traders who see no reason to establish a significant position until the FOMC has released its decision on Tuesday. (The auctions are Wednesday for the 10 year and Thursday for the 30 year.)

There was virtually no trading in corporate bonds and spreads are finishing unchanged.

The last conversation that I had about MBS showed that paper unchanged, too.

Swap spreads were 1 basis point to 2 basis points wider.

Agency spreads were where the action was today. Spreads widened by 4 basis points to 6 basis points in very light trading. The only reason which anyone would offer is that the Home Loan sold $3billion 5 years yesterday, and euphemistically speaking it was a pig. It priced T+82 and never saw the light of day. The issue is available at the moment at +89. The conventional wisdom is that the thinness of the market and the stench from that issue dragged the market lower.

Have a great weekend.