Prices of Treasury coupon securities drifted lower in an excruciatingly slow overnight session. One dealer reported some selling of very short coupons and noted that the tone in credit product was marginally weaker. Yields in the belly of the curve are 1 basis point to 2 basis points higher and the 10 year note has drifted above the psychologically meaningful 2.75 level. The yield curve is slightly flatter with 5s 10s 0.3 narrower at 137.2 and 5s 30s 1.0 basis points flatter at 244.3. Today is month end so there might be some motivation to flatten but I would use that as an opportunity to reload steepening exposure. As we pass month end and the taper discussion accelerates I think we will see another iteration of steepening.
Today will likely be rather subdued as equities and bond markets close early. There is no data in the states and the focus should shift to conversations about the labor data report next Friday which will weigh heavily in the deliberations of the FOMC. One other factor in today’s trade is the so called Black Friday effect. Investors will look to anecdotal evidence regarding how active Mom and Pop are at opening their respective wallets at the mall. That task is made more difficult by the popularity of on line shopping which has cannibalized mall sales.