Treasury Update

April 30th, 2009 11:31 am | by John Jansen |

The long end of the Treasury market continues to erode. Erode is too weak a word. it is being swept away. The dealer community is aggressively shooting the taxpayer in the big toe for allowing and acquiescing in profligate levels of issuance by the government of the people.

As a for instance, the 2year/10 year spread was 209 basis points yesterday before the FOMC statement. That spread is currently 220 basis points.

The 10year/30 year spread was trading at 91 basis points just prior to the FOMC statement. That spread is about 96 basis points currently.

Similarly,the 2year/5year spread has widened from 103 basis points to 111 basis points.

Rates are backing up again this morning. I think that there was disappointment at the dollar amount and percentage of bonds taken in the buyback.

Dealers have reported solid demand from central banks in the short end of the market and that same crowd has been observed selling the 10 year sector.

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  1. 3 Responses to “Treasury Update”

  2. By K T Cat on Apr 30, 2009 | Reply

    To me, this suggests a lack of long term faith in the dollar due to the wild spending spree. While it’s a good safe haven now, those chickens, as it were, will come home to roost. Hence the selling of long bonds.

  3. By gab on Apr 30, 2009 | Reply

    So, they’re selling long bonds because the dollar will be weak in the future even though it’s not weak now? Is that what you’re saying? Why not just wait until the dollar is actually, you know, weak?

    Secondly – there’s no way to know why bonds are being sold. It may be a supply issue, it may be that money is moving into stocks, it may be that demand for loanable funds is increasing, thus pushing up market rates.

    I reitirate – there’s no way to know. And you can’t believe what traders are telling you, ’cause they don’t know either.

  4. By gab on Apr 30, 2009 | Reply

    Sorry, “reiterate.”

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