This post is by John Jansen from Across the Curve
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Prices of Treasury coupon securities slumped in overnight trading as stock market gains and uncertainty regarding demand for the Treasury seven year note auction (later today)pushed prices lower.
The yield on the 2 year note increased 2 basis points to 1.18 percent. The yield on the 3 year note climbed 3 basis points to 1.71 percent. The yield on the new 5 year note is 3 basis points higherat 2.69 percent. The yield on the 7 year note surged 4 basis points (not exactly a surge) to 3.34 percent. The yield on the 10 year note climbed 3 basis points to 3.69 percent and the yield on the Long Bond increased 2 basis points to 4.53 percent.
The 2year/10 year spread is 251 basis points which is 2 basis points wider than it was when I wrote my closing post.
The 10 year/30 year spread has remained nchanged at 84 basis points.
The 2year/5year/30 year spread is opening the New York session at 33 basis points.
In spite of the excitement and light bidding interest the Treasury market is mired in a narrow but volatile range. Early in the week the 10 year note traded briefly at 3.75 percent. That level attracted buying and since then we have been swinging back and forth between 3.70 and 3.63 percent.
It will be instructive to observe todays auction and see if the apathy which has reigned the last several days continues. Given the results of the last two days I suspect the street will busy itself by shooting the taxpayer in the big toe by cheapening the 7 year note.
At the moment the vitality exhibited by the stock market is aiding that process. I think that participants will temper bid hitting until they have a chance to digest the weekly claims data. That data had fallen sharply because of some faulty seasonal factors. Today’s report should give a cleaner picture of the labor market and will be closely studied. The consensus foresees a jump to 575K from 554K last week.