Prices of Treasury coupon securities are posting very modest gains in overseas trading. A search of news sources does not shed any light on the price movements as the news is a potpourri of information. Global equity markets continue to surge, though the gains at this hour (530AM in New York) are temperate. Futures markets are indicating modest gains in the US when trading begins several hours hence.
Kansans City Federal Reserve President Hoenig added his name to the chorus of Federal Reserve officials endorsing higher rates. He suggests that the central bank should raise rates sooner rather than later and offers the opinion that even a 1 percent or 2 percent funds rate would be quite accommodative. He joins Warsh and Lacker who have each made similar statements. New York Reserve Bank President Dudley took the opposite tack yesterday.
There is one piece of economic data in the US today and that is the monthly report on consumer credit. It has been diving lately as the last report showed that consumer credit was contract at an annual rate of more than 10 percent. August was clunker month so one would expect a better result in August.
The main focus of trading today will be the auction by the Treasury of $ 20 billion 10 year notes. I think that the issue will come with an outright concession as well as a larger concession on the curve. As we speak the 10 year trades around the 3.25 percent level. I suspect a test of what should be strong support at the 3.30 percent level. I also expect that the gap between the 10 year note and the shorter maturity 2 year note and 5 year note will widen into auction time.
Tomorrow the Treasury will auction $ 12 billion Long Bonds. I think that issue will suffer today with the 10 year note.
Currently the yield on the 2 year note is 0.90 percent which is one basis point lower than its closing level yesterday. The yield on the three year note has slipped a basis point to 1.42 percent. The yield on the 5 year note has dropped 2 basis points to 2.22 percent. The yield on the 7 year note has declined 2 basis points to 2.83 percent. The yield on the 10 year note has slipped 2 basis points to 3.24 percent. The yield on the Long Bond has dropped 2 basis points 4.05 percent.
The 10 year/30 year spread is unchanged at 81 basis points.
The 2year/10 year spread is a tad narrower at 234 basis points.
The 2year/5 year/30 year spread is 51 basis points.