Bond Market Open March 10 2009
March 10th, 2009 8:06 am | by John Jansen |Prices of Treasury coupon securities have sagged in overnight trading as the rebound in the stock market and anticipation of supply weigh on sentiment. The yield on the 2 year note has edged higher by 3 basis points to 0.99 percent. The yield on the 3 year note has worked its way 5 basis points higher at 1.41 percent. The yield on the 5 year note has surged 6 basis points to 1.94 percent. The yield on the 10 year note jumped 7 basis points to 2.93 percent and the yield on the 30 year bond also jumped 7 basis points and rests at 3.64 percent.
The 2 year/10 year spread is 194 basis points.
The 2 year/5year/30 year spread has narrowed to 75 basis points from 77 basis points late yesterday.
The highlight of the trading session today will be the 3 year note auction. The US Treasury is immersing the street in $34 billion new bonds. The issue has cheapened on the curve overnight in anticipation of the bidding process. It has cheapened 2 basis points to the 2 year note at +42 basis points and on the 2year/3 year/5 year it has also cheapened 2 basis points to 11 basis points rich to the wings. With the roll into the WI issue the butterfly is approaching zero, a level which would produce substantial arb interest.
This issue should go well as it is the first in an unholy trinity of issuance this week. The street can buy this one and gauge interest in the market. If there appears to be a buyers strike then the quick and easy alternative is to then sell 10s and 30s versus the 3 year position.
Analysts at Greenwich Capital raise two pertinent negative points in their morning note to clients. There is plenty of competition out there for this issue as there was a plethora of FDIC guaranteed issuance yesterday.
Additionally, the same analysts note that the JPMorgan weekly client survey is as long as it has been since January 2002 (when oh my God I still worked there) and theoretically that should diminish demand.
Federal Reserve Chairman Bernanke will speak before the very august Council of Foreign Relations today. ( I imagine high ceilings and dark panels on the walls.) Chairman Bernanke will address the topic of Financial Reform and Systemic Risk.
2 Responses to “Bond Market Open March 10 2009”
By Alex on Mar 10, 2009 | Reply
U.S. wholesale inventories fell for the fifth consecutive month in January and sales plummeted amid a slump in demand. Falling sales lifted the inventory-to-sales ratio, a measure of how long it would take to sell stocks at the current sales pace, to 1.30 months’ worth – the highest since a matching reading in January 2002 — from December’s 1.27 months.
By Greg on Mar 10, 2009 | Reply
The markets are supposed to be excited about Citi posting “operating earnings” for January/ February of this year… haven’t we played this “earnings not counting expenses” game before? Isn’t that how Wall Street lost the confidence of its customers in the first place?
Lets see Citi report its real earnings instead of imaginary nonsense:
If Citi plans to exit the mortgage lending business permanently — than it needs to so state, it needs to lay off that entire staff, and it needs to ringfence that division. Since none of that happened, the charges from earlier mortgage mistakes are part of an on-going business and count against earnings
If Citi wants to be treated like a real bank, it needs to generate a profit WITHOUT taxpayer subsidies… earnings which stem from the Fed/taxpayers lending money at below market rates are not true earnings, they are a government subsidy and need to be excluded
If the markets going to come back, confidence needs to be restored. Reporting “earnings” that include well publicized lies is not a way to restore confidence
If Pandit doesnt grasp this, he should be fired for cause. He might have inherited a mess from Weill/Prince — but the decision to publish false earnings is 100% on him