Jan 12. Portugal’s 10 yr auction below 7% yield
–Much awaited Portugal bond auction went off successfully, aided by ECB and Asian buying. Pressure abating in Europe at this moment.
–Today is the US ten year auction, followed by 30 year bonds tomorrow. The treasury is also set to release tentative schedule for the next round of Open Market Purchases. There are a couple of things that could cause a bit of a concession… Plosser spoke yesterday and thinks QE could “backfire” and Dallas Fed’s Fisher is likely to voice the same sentiment today. Also, oil was up around $1.50 yesterday, threatening recent highs, and precious metals were strong, a reminder of inflationary concerns. I think buyers will ultimately come in for auctions, as european stress continues, but the risk is probably to the downside for the next couple of days. Beige Book released this afternoon.
–Implied vol compressing in interest rate futures, with March treasury vol at lower end of recent range (FVH at new recent low).
–While the stock market presses to better levels, and there is a general feeling of stronger economic growth, it is worth noting that the back up in mortgage rates over the past couple of months is likely to slow the housing market, which is really a more pervasive asset class. Additionally, higher gasoline prices are a challenge. However, there is good news as well, the WSJ had an item in its editorial section noting that federal revenues are up about 9% in the first fiscal quarter.
