Treasury prices ended with mixed performance on Wednesday as a strong US Treasury auction failed to increase demand for government debt (exception being the long bond). Starting at noon yesterday, the Treasury department auctioned $32 billion of a 7-year note with a bid to cover ratio of 2.72. This ratio is above the 2.56 average seen in the past 10 auctions. Indirect bidders, comprised mostly by foreign central banks, only demanded 45% of this auction, compared with 63% in November and 59% in October. Yesterday’s auction marked the end of the year’s activity after the $44 billion 2-year note and $42 billion 5-year note auctions that took place earlier this week, bringing the total amount sold to $118 billion. This was an unprecedented year in terms of debt issuance with the total amount reaching $2.183 trillion. By the end of the day the 2-year note was unchanged at 1.08% yield while the 5-year note rose only slightly (2/32 to yield 2.61%). The benchmark 10-year note also ended with no change at 3.79% while the long bond rose 15/32 to yield 4.61%.
The Treasury market is trading at lower levels this morning as investors react to better than expected Initial Jobless Claims numbers released this morning. The 2-year is down 4/32 yielding 1.15% while the 5-year note has dropped 14/32 to yield 2.71%. The 10-year Treasury is down 18/32, yielding 3.85% while the 30-year Treasury has declined 30/32 this morning to yield 4.66%.
The Department of Labor released its weekly Initial Jobless Claims report showing that first time claims reported last week were the lowest in 17 months at 432,000; analysts’ expectations were for an increase of 460,000 for the period. However, investors need to keep in mind that this number of unemployment claims could have been distorted by the short Christmas week. Yet, the more stable 4-week moving average number of initial claims also registered a slight drop of 5,500 to 460,250. More significant is the fact that continuing claims dropped below the 5 million mark for the first time since February of this year at 4.981 million.
2009 was a year when the yield of intermediate and long US Treasuries experienced a reversal in the “flight to quality” investment seen in 2008 (when yields dropped dramatically as a result of the beginning of the financial crisis). In 2009, short term Treasuries continued to trade at historically low levels, partially due to the current overnight lending rate of 0 – 25 bps and also as some investors decided to keep their investments in short term instruments as a result of continuing economic concerns. However, the intermediate to long range of the curve did see a drastic change with the 5-year note gaining 115 bps (from 1.55% to 2.69%) this year. The 10-year note rose 163 bps (from 2.21% to 3.85%) while the long bond moved close to 200 bps (from 2.67% to 4.66%).
The Treasury market is trading at lower levels this morning as investors react to better than expected Initial Jobless Claims numbers released this morning. The 2-year is down 4/32 yielding 1.15% while the 5-year note has dropped 14/32 to yield 2.71%. The 10-year Treasury is down 18/32, yielding 3.85% while the 30-year Treasury has declined 30/32 this morning to yield 4.66%.
The Department of Labor released its weekly Initial Jobless Claims report showing that first time claims reported last week were the lowest in 17 months at 432,000; analysts’ expectations were for an increase of 460,000 for the period. However, investors need to keep in mind that this number of unemployment claims could have been distorted by the short Christmas week. Yet, the more stable 4-week moving average number of initial claims also registered a slight drop of 5,500 to 460,250. More significant is the fact that continuing claims dropped below the 5 million mark for the first time since February of this year at 4.981 million.
2009 was a year when the yield of intermediate and long US Treasuries experienced a reversal in the “flight to quality” investment seen in 2008 (when yields dropped dramatically as a result of the beginning of the financial crisis). In 2009, short term Treasuries continued to trade at historically low levels, partially due to the current overnight lending rate of 0 – 25 bps and also as some investors decided to keep their investments in short term instruments as a result of continuing economic concerns. However, the intermediate to long range of the curve did see a drastic change with the 5-year note gaining 115 bps (from 1.55% to 2.69%) this year. The 10-year note rose 163 bps (from 2.21% to 3.85%) while the long bond moved close to 200 bps (from 2.67% to 4.66%).
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