Thread: Bond Market

Someone mentioned that the 30-year didn't do so well. I say draw your own conclusions:

2:08 pm - CNBC has a Treasury representative on saying they are "ecstatic" with the 30-yr auction results.
1:41 pm - 30-yr After Auction: The new long-bond (when-issued) grabbed a firm bid post-auction as yields dipped as low as 4.500% from 4.570% just prior. Trade has drifted off somewhat to hang around its auction price at 4.520%.
1:15 pm - Fed Speak: Chicago's Fed pres Moskow says he sees little slack in labor market as low jobless rate may put upward pressure on wages. He adds 'neutral' does not necessarily mean end of rate increases though inflation expectations remain contained. Moskow's comments come a week before Bernanke's first appearance as top dog before congress & any interim Fed speak is likely to be well-tempered until the new chief gets his footing.
1:05 pm - Ta Da!: The $14B 30-yr auction hits with a 4.53% draw, a mediocre 2.05 bid-to-cover & an enormous 65.4% indirect bidder participation rate! The market may take a few minutes to really digest the results but the less than stellar cover will be balanced by the nice indirect bid.
12:56 pm - Long-Bond to Fly: Trade is bracing for the auction, with the 30-yr potentially responding violently, although to which components it is hard to say. The market heads into the results on the $14B 30-yrs going off today mixed. The draw, bid-to-cover & indirect bidder participation numbers all carry weight, but the response will be led by the most out-of-whack input, "rock crushes scissors...but paper covers rock," notes one long-time dealer. Speculation regarding the auction is all over the map, with rationalizations from all sides also varied but tilting toward a cheerleader attitude. The optimists are countered by the heft of some of the more pessimistic, who point out that the expected global demand may disappoint, but seeing as how there has not been a US 30-yr issue in since 2001, there is not a whole heck of a lot to go on. Put buyers have been showing up in the options on 10-yr futures, with one player stepping up now to buy 15K Apr 107 puts.
12:40 pm - Bond Investors Shrug off Deficit: Today's WSJ points out that although government borrowing has ballooned in the last 4 years, interest rates have remained relatively low. The theory & "The fear: Investors would demand lower prices for an increasing supply of government debt, which would drive up yields and borrowing costs across the economy," has not materialized. As Charles Parkhurst, a fixed-income portfolio manager at hedge fund Archeus Capital, points out "I don't think the market is focusing on deficits right now... nobody cares" as he contrasts the current period with the mid-90's when prices were highly sensitive to deficit data.
12:18 pm - Treasuries Stutter Step into Supply: The market picked itself up off its lows though remains slightly underwater heading into the auction. The 10-yr yield pulled back near unchanged at 4.553% after drifting higher early on to 4.577%, while the 30-yr yield traded in similar fashion back to 4.685% from 4.712%. The 2-10-yr yield spread has been choppy as curve trade dominates pushing & pulling yields around, though ending up just slightly steeper at -3.5 from its mosre inverted level of -4.1. The 2-30-yr yield spread flattened to 6.0 from a peak of 8.0. The market will be thankful to get today's auction out of the way & enjoy a brief break from supply though anticipation of 2's & 5's down the pike may yet keep some pressure on prices. There is talk of Asian buying being seen this morning in the Bund market, leading to questions regarding Asian participation rates. In the same vein, CNBC's Rick Santelli points out there will be more interest in straight demand versus foreign demand (bid-to-cover versus indirect bidder participation) as there is long-term foreign supply out there & those who want the 30-yrs will have plenty of opportunity to pick them up in the secondary market. Currencies are treading water ahead of the last leg of refunding, backing off slightly against the buck, with the euro sitting at 1.1964 & the yen slipping to 1.187300. Markets in general are skittish in front of the 30-yr results, spot gold has been an overall beneficiary of general uncertainty, pushing higher hard & recovering the bulk of the past 2-days losses, tagging 551.45 before backpedaling to 559.50 (+8.00). Crude is also seeing a corrective resurgence as the front month contract gains 1.6% 63.45 (+0.90) as the contract begins to roll into expiration.