Bond Expert: Friday Outlook

Sep.12.08 | About: Lehman Brothers (LEH)

Prices of Treasury coupon securities are posting,  on balance, small losses in overseas trading.

As of this writing, there is no consummated transaction for Lehman Brothers and maybe the market is signaling a level of acceptance of very debilitated investment banks. Having said that, it would surprise me if Lehman Brothers remains an independent entity through the weekend.

The yield on the benchmark 2 year note is unchanged at 2,22 percent. The yield on the benchmark  5 year note has climbed 1 basis point to 2.93 percent. The yield on the benchmark 10 year note increased 2 basis ponts to 3.66 percent and the yield on the Long Bond climed 2 basis points to 4.24 percent.

GDP in Japan contracted at an annual rate of 3.0 percent in Q2. It was the steepest decline since 2004 and exceeded the previous estimate for the period.In the Eurozone job growth slowed to a tepid pace. Employment payroll growth cimbed just 0.2 percent in Q2 after gaining 0.3 percent in Q1. YOY growth slowed to 1.2 percent from 1.6 percent in the prior period and was the smallest gain since Q4 2005.

In a week in which credit concerns and systemic risk dominated trading, today will be a day with economic data to digest as participants entertain data on retail sales, PPI, consumer sentiment and business inventory.

PPI should reflect the declines in the price of oil in August. Retail sales should drop as the rebate checks disappear and because consumer income gains are negligible with the labor market shedding jobs.