Prices of Treasury securities are registering mixed changes in overnight trading. “Mixed changes” in this environment is somewhat puzzling and even a bit troublesome.
The US market has always represented the ultimate safe haven venue yet this morning according to my screen at about 700AM New York time the yield on the 2 year note was actually several basis points higher than where it closed late yesterday. Indeed, the yield on every Treasury issue is higher than the level at which it finished in late trading yesterday.Is this the beginning of the end for the dollar and the Treasury market? Is this the first sign of the bursting of the bubble in Treasury securities? That market, in a sense, represents the ultimate bubble as it exists at the whim and caprice of foreign investors, who have as participants in a Faustian bargain, financed our war(s) and our lifestyle so generously over the last decade. Maybe even that bizarre construct is crashing about us as we speak.
I can only say that with financial markets in full retreat and full meltdown it is thoroughly uncharacteristic for prices of Treasury coupon securities to be lower.
The yield on the 2 year note has climbed 4 basis points to 1.59 percent. The yield on the 5 year note has jumped 11 basis points to 2.77 percent. The yield on the 10 year note has climbed 5 basis points to 3.83 percent and the yield on the Long Bond has edged higher by just a single basis point to 4.12 percent.
The 2year/10 year spread is 224 basis points.
The 5 year point on the curve has taken a drubbing since Tuesday. On Tuesday, I closed the 2year/5year/30 year butterfly at minus 56 basis points. At the current time it is minus 17 basis points. That means it has underperformed the wings by 39 basis points. One can blame the Treasury with its surprise reopening of $40 billion of securities for most of that movement.
I do not have much to add as you can see for yourself the carnage all about us.