August 28 2008 Opening Comments

August 28th, 2008 7:53 am | by John Jansen |

Prices of Treasury coupon securities have slipped in overnight trading in advance of an auction of $22 billion 5 year notes later today. Weakness in the bund market also elicited some sympathetic selling of Treasuries.

The yield on the 2 year note has climbed 2 basis points to 2.35 percent. The yield on the 5 year note has jumped 4 basis points to 3.05 percent. The yield on the 10 year note has risen 4 basis points to 3.80 percent and the yield on the Long Bond has climbed 3 basis points to 4.41 percent.

The yield spread between the 2 year note and the 10 year note is 145 basis points.

German unemployment dropped to its lowest level in 16 years as the rate fell to 7.6 percent in August from 7.8 percent in July.

UK house prices sank by 1.9 percent in the month and 10.5 percent YOY. The YOY decline was the steepest in 18 years.

An index of retail sales in the UK was also less than festive as it plunged to -46 which was the worst level recorded for the index since the inception of the index in 1983.

Spanish home prices plummeted 29.6 percent from a year ago following a more than 34 percent YOY fall in May.

The credit crunch is always lurking as French bank Nataxis recorded an unexpected loss resulting from 1.5 billion Euros write down related to US bond insurers.

Separately, the price of energy is rising as the hurricane is about to enter the Gulf of Mexico and it holds the potential to wreak havoc on the energy sector as it travels across the warm waters of the Gulf.

The US markets will remain illiquid as many participants are away on extended holidays. Those who remain will digest the initial claims data in a few minutes and the revised GDP data.

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