Prices of US Treasuries in the intermediate and long range of the curve rose on Tuesday as equities continued to lose ground due to European economic concerns. Although equities had declined sharply in morning trading, with the Dow Jones losing over 200 points, by the end of the day stocks recovered with the DJIA only losing 22 points to close at 10,043. The 5-year Treasury note ended the day 2/32 lower to yield 1.19% while the benchmark 10-year note rose 11/32 to yield 3.15%. The long bond gained 16/32 to yield 4.05%.
In looking at other fixed income products, the recent flight to quality investing has resulted in some price erosion of Secondary Preferreds and wider spreads in the corporate market. On average, Qualified Dividend Income Preferreds are trading 10.09% lower from a month ago. Also, corporate bond prices are wider than a month ago; for example the Bloomberg 30-year A-Rated Financial Corporate index is 27 basis points wider from the low point on April 22, 2010, yielding 5.49%.
Treasury prices are sharply lower this morning reversing yesterday’s gain as market participants react to the better than expected Durable Goods Order report. The 10-year benchmark Treasury note is currently trading down 12/32 with a 3.20% yield, while the 30-year has lost 25/32 to yield 4.10%. On the economic front, the report on Durable Goods Orders has invigorated investor’s optimism as it was released with stronger than expected numbers. Durable Goods Orders show the dollar volume of new orders, shipments, and inventory levels of durable goods (items meant to last 3 years or more), and is considered a leading indicator of manufacturing activity. The overall number returned to positive in April and beat analysts expectations over twofold at 2.90% (1.30% expected). The previous month’s report was also upwardly revised to 0.00% from -1.30%. However, Durable Goods Ex-Transportation showed a decline of 1.00% while analysts had expected a 0.50% increase for the period. March’s data was revised from 2.8% to 4.8%.
A breakdown in the Durable Goods number shows that the robust jump in orders was propelled by a 228.00% in the nondefense aircraft category (civilian airplanes). However, the Non-defense Capital Goods ex-Aircraft (NdCGeA, excluding military and airplane orders) subcomponent declined as orders of machinery, electrical equipment and primary metals fell 5.90%, 6.90% and 2.00% respectively. Nevertheless, the 3-month annualized number continues to improve from 12.10% in March to 15.20%. The NdCGeA is a key barometer of business equipment spending (shipments) and investors pay close attention to it as it is less volatile than the overall data. The shipments data of the Durable Goods is also a component of Gross Domestic Product.
In other relevant news, the New Home Sales data, key indicator of the state of the housing market, will be released at 9:00 am CDT and is expected to show an increase of 3.40% for the month of April at 425,000. Additionally, the Treasury will auction $40 billion of a 5-year note today at noon CDT. The Treasury will also auction $31 billion of a 7-year note on Thursday also at noon CDT. Both issues will be dated on May 31st and will settle on June 1st.
In looking at other fixed income products, the recent flight to quality investing has resulted in some price erosion of Secondary Preferreds and wider spreads in the corporate market. On average, Qualified Dividend Income Preferreds are trading 10.09% lower from a month ago. Also, corporate bond prices are wider than a month ago; for example the Bloomberg 30-year A-Rated Financial Corporate index is 27 basis points wider from the low point on April 22, 2010, yielding 5.49%.
Treasury prices are sharply lower this morning reversing yesterday’s gain as market participants react to the better than expected Durable Goods Order report. The 10-year benchmark Treasury note is currently trading down 12/32 with a 3.20% yield, while the 30-year has lost 25/32 to yield 4.10%. On the economic front, the report on Durable Goods Orders has invigorated investor’s optimism as it was released with stronger than expected numbers. Durable Goods Orders show the dollar volume of new orders, shipments, and inventory levels of durable goods (items meant to last 3 years or more), and is considered a leading indicator of manufacturing activity. The overall number returned to positive in April and beat analysts expectations over twofold at 2.90% (1.30% expected). The previous month’s report was also upwardly revised to 0.00% from -1.30%. However, Durable Goods Ex-Transportation showed a decline of 1.00% while analysts had expected a 0.50% increase for the period. March’s data was revised from 2.8% to 4.8%.
A breakdown in the Durable Goods number shows that the robust jump in orders was propelled by a 228.00% in the nondefense aircraft category (civilian airplanes). However, the Non-defense Capital Goods ex-Aircraft (NdCGeA, excluding military and airplane orders) subcomponent declined as orders of machinery, electrical equipment and primary metals fell 5.90%, 6.90% and 2.00% respectively. Nevertheless, the 3-month annualized number continues to improve from 12.10% in March to 15.20%. The NdCGeA is a key barometer of business equipment spending (shipments) and investors pay close attention to it as it is less volatile than the overall data. The shipments data of the Durable Goods is also a component of Gross Domestic Product.
In other relevant news, the New Home Sales data, key indicator of the state of the housing market, will be released at 9:00 am CDT and is expected to show an increase of 3.40% for the month of April at 425,000. Additionally, the Treasury will auction $40 billion of a 5-year note today at noon CDT. The Treasury will also auction $31 billion of a 7-year note on Thursday also at noon CDT. Both issues will be dated on May 31st and will settle on June 1st.
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