Treasury Market Update

May 30th, 2014 10:23 am | by John Jansen |

Prices of Treasury coupon securities are sagging this morning as the rush to lower yields has run its course for now. There are several reasons which participants have cited  for the higher yields today. I would start by quoting myself from this morning (which is obnoxious and i apologize) but the auction process filled in a chunk of the short base and now that the street owns paper the market trades with a different tone( not quite merdurinous yet but rather soggy). Some have also postulated that the rally on Wednesday was driven by Europeans who were out yesterday for Ascension Thursday and many of whom have taken long weekends. That source of demand according to that theory is over and done. One other concern is a steep sell off in mortgages. One trader noted that FNMA 3s are off 20 ticks from their high prints yesterday. Finally, one trader noted that it is Friday and there is often a good bit of rate lock selling on Friday in anticipation of forthcoming corporate supply.

Fundamentals are back in play too and investors will want to see next weeks heavyweight data triumvirate of the China PMI.

The yield curve is shifting about too. The 30 year bond has lagged since I marked prices at 530AM this morning. The benchmark bond has under performed 10s and 5s by about a basis point. The 10 year note has gotten very rich ans 5s 10s 30s is now about 7 basis points. One trader suggested that was a result of the run up in MBS prices (FNMA 3s specifically earlier in the week) which would have helped richen the sector.

In terms of flows most dealers with whom I converse are reporting light activity today.

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  1. One Response to “Treasury Market Update”

  2. By sean on May 30, 2014 | Reply

    Lets keep it simple. Dennis Gartmen said everything was going up and you can’t short rates. I’ve never seen a more consistant bottom/top picker.

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