There’s some interesting market action in the Treasury arena today. The long bond futures are getting blitzed, with a price decline of 1 2/32 at last check. Moreover, the yield on the 10-year note is once again testing the 3% area (a gain of about 10 basis points on the day).
The immediate catalyst appears to be the slightly worse-than-expected auction of a record $35 billion in 5-year Treasury Notes. They went off at a yield of 1.94%, compared with pre-auction expectations for a reading of 1.92%, according to Bloomberg. But the bigger-picture issues (in my humble opinion) remain the flood of supply hitting the market, the exploding budget deficit, and the trashing of the Fed’s balance sheet, among other things.
{ 5 comments… read them below or add one }
Mike-
Has the government published a list of what securities they are going to buy back and when? It seems to be timed with major events. I know they are trying to keep the market rates low, but like you said with the flood of issuance – how are they going to be able to keep the rates low. In addition, can you touch on the TIC report and what you see coming down the line?
Thanks
Mark
If these auctions go bad will that effect the stock market and Financial Stocks?
Mike,
What makes the market go up on days when the GDP news is worse? What would be a bad news day for the market, since this bad news makes it go up? Thanks Mike.
Your recent Treasury information appears to contradict many of the recommendation made in Dr. Weiss’s recent book. What’s up? Thanks, Becca
Mike Larson Reply:
May 7th, 2009 at 4:50 PM
Quite to the contrary, Martin and I generally agree about LONG-TERM Treasuries. We have both said prices will likely fall and interest rates will likely rise. And that is precisely what has happened. We also agree that SHORT-TERM Treasuries do not have the same risks as long-term bonds, and that they are a safe place for parking cash. There is a world of difference between 1-month or 3-month bills and 30-year bonds, as well as a world of difference between ETFs and mutual funds that invest in the short-term part of the bond market and those that invest in the long-term part of the market.
Hi !
I am asking a very basic question. How treasuries affect stock market action ? Awaiting your comment.