Mar 25. Treasury yields at year’s high

Interest rates surged yesterday, related in part to exit of swap spreads, but also perhaps partially due to Portugal downgrade and general distrust of sovereign debt.  A poor 5 yr auction added to selling pressure, with 7 yr scheduled today.  This year the yield in tens has been in a range of around 3.60% to 3.83%, and bonds have been 4.50% to 4.73%.  Yesterday we reached the upper levels with tens 3.83 (up 15 bps) and bonds 4.72.  Two year buyers at Tuesday’s auction are already 10 bps underwater. 

–The move didn’t stop the TYM strangle seller, who was back in selling 114/119 strg at 41.

–The dollar exploded to new highs and gold sunk.  It seems to me that market action of this sort is likely to add to financial stress.  I tend to think that these yield levels represent buying opportunities, but bears point to never-ending supply and the Fed’s end of MBS buying.  If rates really start screaming higher the US housing market will implode (again).  Seems unlikely the Fed would consider rate hikes with a stronger dollar and higher long end yields providing economic restraint.  

–Today’s news includes Job Claims expected 450k.  Bernanke speaks before the House Finance Committee on Fed’s exit strategy. Seven year auction.

Posted on March 25, 2010 at 5:26 am by alexmanzara · Permalink
In: Eurodollar Options

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