Oct 16, Ten year treasury testing 3.5%

In the space of a week, treasury yields have had a large yield back-up as stocks have strengthened and the dollar weakened.  On October 8, the long bond was 3.99%, but was above 4.30% yesterday.  Tens were down to 3.17, but now are testing 3.5% again (closed 3.465%). New recent high in 2/10 at 251.5.  That spread is up 20 bps from Oct 8. 

–Though volume wasn’t particularly heavy, option trades were mostly put spread buyers in Dec midcurves and treasuries.

–Today’s news includes Industrial Prod, expected +0.2% from +0.8, with Capacity at 69.6.  Consumer Sentiment expected 74.0.

–RealtyTrac says Q3 was the worst three months ever for foreclosures. Dollar weakness, along with signs of economic stabilization are pushing yields up.  The end of the the Fed’s permanent OMO’s of treasuries may also be a factor.  Though stocks have responded positively to cheap funding and lower dollar (making US goods more competitive), the domestic housing market is much more difficult to inflate, because residential housing (now) requires income flow to support prices. And in an ironic twist, one of the reasons stocks have done better is that costs, i.e. jobs, were cut.  There is going to be a lot of pressure on the Fed to expand its program to buy MBS.

Interactive jobs map link:

http://tipstrategies.com/archive/geography-of-jobs/?fark

Posted on October 16, 2009 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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