Bond Market Open November 24 2009

November 24th, 2009 7:44 am | by John Jansen |

Prices of Treasury coupon securities are posting modest gains in overnight trading.

We are well into the holiday we and I suspect that trading volumes will be on the light side,notwithstanding the chunky auction of 5 year notes later today. That process should dominate the bond market landscape as dealers put scarce capital at risk.

David Ader atCRT make several salient points about this auction. Of the last twenty five 5 year note auctions, only four have stopped through 100PM market levels. There are several reasons to anticipate the same result today.

As I noted earlier it is a holiday week and many players are on vacation or will be shortly. That will dampen bidding as the larger players will not return until after the holiday.

If one misses the auction today, there is no reason to panic as the Treasury as a round of 7 year notes on the block tomorrow. So this is not exactly one’s last opportunity to buy bonds.

Of more immediate concern to bidders is the release of the minutes of the last FOMC which will be available one hour following the bidding for the 5 year note. Mr Ader at CRT makes the important point that the Bernanke speech last week trumps the minutes in that it will be difficult for the chronicle of that meeting to offer a more dovish spin on the Fed than did the Bernake speech.

So in a sense it is possible that the minutes can only deliver bad news to the bond market as the Bernanke speech has already broadcast a broadly bond bullish story.

Overnight the German IFO was better than expected and European IP registered solid gains.

The yield on the 2 year note declined a basis point to 0.77 percent. The yield on the 3 year note slipped 2 basis points to 1.24 percent. The yield on the 5 year note is lower by a basis point at 2.16 percent. The yield on the 7 year note declined 2 basis points to 2.86 percent. The yield on the 10 year note dropped a solitary basis point to 3.34 percent. The yield on the Long Bond declined 2 basis points to 4.26 percent.

The 10 year/30 year spread is a tad flatter at 92 basis points.

The 2 year/10 year spread is 257 basis points.

The 2 year/5 year/30 year spread (using the new 2 year and the WI 5 year note) is a tad cheaper at 63 basis points.

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  1. 4 Responses to “Bond Market Open November 24 2009”

  2. By bond noob on Nov 24, 2009 | Reply

    John, how do you get on David Ader’s distribution? Is it published on the web? thanks.

  3. By bob on Nov 24, 2009 | Reply

    but WI trades to yield 5 bp more than on the run (10/31/14)

  4. By Cedric on Nov 24, 2009 | Reply

    Do you anticipate a lot of pent up demand next week, since we can’t buy on Thursday, and only half a day on Friday?

  5. By Bman on Nov 24, 2009 | Reply

    In my humble opinion these holiday-shortened days are not as illiquid as they used to be. technology and electronic trading haved helped those who are physically absent to make trades. The market is much more efficient now. Yes, “junior” traders may not take on as much size, or make tight markets, but there is usually someone just a call away if that crucial.

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