Prices of Treasury coupon securities registered small mixed changes in a lackadaisical and lackluster trading session. Economic data was supportive of half century low yield levels. Housing prices continued their slide and consumer confidence slumped. The Chicago Purchasing manager Survey was better than expected but remains deeply in contractionary territory.There were more themes today than my opening sentence communicates. There was some mortgage selling early in the day and I believe that pressured the 5 year sector. The 2 year/5year/30 year butterfly has collapsed to inside of 40 basis points. At its most expensive levels it was about 50 basis points richer.
One participant noted that he had heard of some allocation trades with money moving money from bonds to stocks.
Another salesman reported nascent activity out of the US fixed income into European fixed income. He noted that many accounts view that as the macro trade for 2009. The federal funds rate can not go lower stateside but the base rate in Europe has plenty of room on the downside.
The yield on the 2 year note declined 3 basis points to 74 basis points. The yield on the 3 year note dropped 3 basis points to 0.92 percent. The yield on the 5 year note edged higher by a basis point to 1.46 percent. The yield on the 10 year note dropped 2 basis points to 2.08 percent. The Long Bond was the star of the day as its yield declined 5 basis points to 2.58 percent.