Some Opening Comments March 31 2009

March 31st, 2009 7:31 am | by John Jansen |

Prices of Treasury coupon securities are posting very modest losses across the entire maturity spectrum. Each benchmark issue has seen its yield rise by a meager one basis point.

The yield on the 2 year note is 0.85 percent and the yield on the 3 year note is 1.20 percent. The yield on the 10 year note is 2.73 percent and the yield on the Long Bond is 3.60 percent.

There is a reasonable amount of economic data to stir the palate today.

The Case Shiller home price index should post a decline once again but a a slower rate. Analysts at UBS cite tighter lending standards as well as high inventories.

The Conference Board survey should post a slight gain reflecting improvement in the Michigan survey as well as the rebound in the equity market.

The Chicago PMI should bounce slightly but will remain at very depressed levels (consensus 34.4).

S and P cut the AAA rating of Ireland to AA+ and left the outlook negative signaling the possibility of additional downgrades. Spreads between comparable Irish and German bonds are about 10 basis points wider.

The Treasury market grows increasing illiquid. Dealers reported an eery silence yesterday from clients. The level of activity is and was extremely light.

At current levels (2.73 percent) the 10 year note is trapped in the middle of a broad range. Yields near 3 percent elicit buying by customers while yields near 2.50 experienced following the Federal Reserve decision to buy Treasuries brings investor selling.

There is quite a bit of economic data over the remainder of this week and that might mold perceptions. If it does not, then expect the powerful force of supply next week to result in lower prices. The one constant this year has been that one can generally make money by being short that which the Treasury is about to sell.

But for now at these levels there is no compelling trade.

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