Treasury prices were mixed on Monday after a lack of economic news gave investors little to follow during the day continuing yesterday morning’s trading pattern with Treasury prices increasing on the short and intermediate range and dropping on the long end due to the return of inflationary worries. By the end of the day the 2-year note gained 2/32 yielding 0.94% while the 5-year rose 5/32 to yield 2.56%. The benchmark 10-year note improved 3/32 yielding 3.81% while the 30-year bond dropped 7/32 to yield 4.73%. For the record the Treasury auctioned $10 billion of 10-year TIPS with a high yield of 1.43% and a bid to cover ratio of 2.65. This ratio was in line with the 2.59 average seen in the past 4 auctions. Indirect bidders, composed mainly by foreign central banks, demanded 40.70% of this auction.
Treasury prices are higher this morning as the Commerce Department announced that the trade imbalance increased for the month of November. The 2-year note has gained 1/32 yielding 0.91% while the 5 year note is trading 10/32 higher to yield 2.49%. The benchmark 10-year has increased 23/32 to yield 3.73% while the long bond has recovered one point 14/32 to yield 4.64%. The Commerce Department announced that the trade gap between imports and exports continued to widen for November. While total exports reached $138.2 billion, a 0.90% increase from the previous period, it was still $36.4 billions short of total imports. Analysts had expected a smaller deficit at -$34.6 billion. This difference was due to the fact that the 0.90% change in exports was no match for the 2.60% increase in MoM imports which reached $174.6 billion in November. The previous month’s deficit was also revised higher to -$33.2 billion from -$32.9 billion.
This higher than expected trade imbalance can be attributed to higher oil prices which affected the Imports component by 6.80% and to a somewhat tepid global demand for US goods due to continuing global economic challenges. Although the trade deficit can be considered a lagging indicator, this wider than expected imbalance supports the likelihood that the Federal Reserve will keep the overnight lending rate at its current 0.00 – 0.25% range as net exports is a component of GDP and a higher than expected number would have a negative impact on the 4Q2009 GDP report scheduled to be announced later this month.
Treasury prices are higher this morning as the Commerce Department announced that the trade imbalance increased for the month of November. The 2-year note has gained 1/32 yielding 0.91% while the 5 year note is trading 10/32 higher to yield 2.49%. The benchmark 10-year has increased 23/32 to yield 3.73% while the long bond has recovered one point 14/32 to yield 4.64%. The Commerce Department announced that the trade gap between imports and exports continued to widen for November. While total exports reached $138.2 billion, a 0.90% increase from the previous period, it was still $36.4 billions short of total imports. Analysts had expected a smaller deficit at -$34.6 billion. This difference was due to the fact that the 0.90% change in exports was no match for the 2.60% increase in MoM imports which reached $174.6 billion in November. The previous month’s deficit was also revised higher to -$33.2 billion from -$32.9 billion.
This higher than expected trade imbalance can be attributed to higher oil prices which affected the Imports component by 6.80% and to a somewhat tepid global demand for US goods due to continuing global economic challenges. Although the trade deficit can be considered a lagging indicator, this wider than expected imbalance supports the likelihood that the Federal Reserve will keep the overnight lending rate at its current 0.00 – 0.25% range as net exports is a component of GDP and a higher than expected number would have a negative impact on the 4Q2009 GDP report scheduled to be announced later this month.
Data Source: Bloomberg L.P. Chart by The Fixed Income Strategies Group RBC WM
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