Prices of Treasury coupon securities are registering robust gains in overseas trading but are little changed from levels attained early in Tokyo trading.As best I can ascertain the news is not significantly different time than it was when I wrote last evening at 700PM ET. Equity markets around the globe have dropped in unison and there is a cavalcade of news in which the fragile state of the economy and the depth of the credit crunch are made manifest. Fears that the US has slipped into recession or will do so shortly have sent equities reeling and has raised concern that the weakness in the US economy will spread to other parts of the industrialized world.
The yield on the 2year note has tumbled by 7 basis points to 1.74 perccent and the yield on the 5year note has fallen the same amount to 2.61 percent. The yield on the 10year has registered a decline of 4 basis points to 3.63 percent and the yield on the bond has slipped 3 basis points to 4.49 percent.
The 2year /10 year spread is now 189 basis points and just shy of the 192 basis point wide touched earlier in this cycle .
To put Treasury yields in some perspective the range on the 10 year note has been between 3.30 percent in January to 3.96 percent recently. So at the current level of 3.63 percent they have retraced about 50 percent of their recent rise.
Equity market weakness will dominate trading today. It is also month end and there is a chunky index extension which will motivate some buying.
As always investors will scrutinize the economic data for clues regarding the near term direction of the economy. Personal spending and income data for January will provide an insight on the state of mind and pocketbook of the consumer. The Chicago Purchasing managers survey will give some hint on the condition of the manufacturing sector.
Strap yourself in as it should be an interesting Friday.