Bond Market Open August 05 2009

August 5th, 2009 7:33 am | by John Jansen |

Prices of Treasury coupon securities are registering modest losses in overnight trading. The 10 year note has retreated once again to the 3.72 percent level which recently has been a zone in which buyers appear. i am not so sure this time as there is no particular piece of information available overnight which might have prompted the sell off. In my opinion the market is reacting to the impending supply announcement a little later this morning.

At that time the Treasury will reveal the details of the 3 year ,10 year and 30 year auctions which are on the docket for next week. The package should total in the vicinity of $ 75 billion which would be the largest package of those three issues since the dawn of time.

The yield on the 2 year note broke down through recent support at the 1.20 level and increased 4 basis points to 1.24 percent. The yield on the 3 year note increased 4 basis points to 1.76 percent. The yield on the 5 year note climbed 4 basis points to 2.73 percent. The yield on the 7 year note increased 3 basis points to 3.37 percent. The yield on the benchmark 10 year note edged higher by 3 basis points to 3.72 percent. And the yield on the Long Bond increased 4 basis points to 4.50 percent.

The 2year/10 year spread is 248 basis points.

The 10 year/30 year spread is 78 basis points.

The 2year/5year/30 year butterfly is 28 basis points.

ADP will release its estimate of non farm payrolls today. One analyst I read notes that in Q2 they were not very reliable predictors as there average miss was 124K per month.

Non manufacturing ISM is expected to be 48.

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  1. 3 Responses to “Bond Market Open August 05 2009”

  2. By Pratik Kothari on Aug 5, 2009 | Reply

    Hi John,
    You can count me as one of the friends of the blog; but unlike others, who generally contribute to your posts, I am one who actually needs to know something from you as I have little knowledge about nitty-gritty of US IR market.

    Can you tell me how the hedging or the process of rate locking works when there is any corporate issue being priced? It would be great if you can please give the brief details of market actions that precede when the corporate issues bonds?

    -Pratik

  3. By John Jansen on Aug 5, 2009 | Reply

    I will write a post in near future.

  4. By Tyler K on Aug 5, 2009 | Reply

    John, perhaps the IT dept. could set up a few posts under the “Pages” section, on the right hand side of the ATC page, for common/Frequency Asked Questions …. eg. rate locking, carry, convexity hedging … perhaps Wikipedia or some other wiki has already covered such topics ? (that way you could just provide a link to such discussion without having to rehash the subject matters)

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