Treasury prices dropped on Wednesday as equities rebounded on reports from U.S. retailers that sales grew at their fastest pace since 2006. Wednesday’s drop in price was more pronounced on the intermediate and long end of the curve with the long bond dropping over a point. By the end of the day the 2-year note had declined 1/32 to yield 0.63% while the 5-year note dropped 3/32 yielding 1.78%. The benchmark 10-year note lost 14/32 of a point to yield 2.98% while the 30-year bond declined 1 and 8/32 of a point yielding 3.96%.
Treasury prices continue to trade lower this morning as investors react to today’s better than expected Jobless Claims report. Currently, the 2-year note has declined 1/32 to yield 0.63% and the 5-year note has declined 5/32 to yield 1.81%. The 10-year note has lost 10/32 yielding 3.02% while the long bond has dropped 15/32 yielding 3.98%. For the record, the Department of Labor released its weekly initial jobless claims report which showed that first time claims dropped by 21,000 versus the previous week revised level of 475,000. Analysts were expecting a reading of 460,000. Additionally, continuing claims were lower than expectations by 187,000 at 4.413 million versus the expected 4.600 million. However, last week’s number was upwardly revised from 4.616 million to 4.637 million.
The less volatile 4-week average number of initial claims was 466,000, a slight decrease of 1,250 compared to the previous week. Until Jobless Claims decrease at a faster rate, the Fed will have less of an incentive to begin raising rates. Currently, there is no Fed Fund implied probability (computed by Bloomberg) that even reaches a 15% chance of a rate hike for the rest of 2010.
Additionally, Consumer Credit, a monthly measure of consumer debt, will be released this afternoon at 2:00 pm CDT. The report can be broken down into two categories: revolving (i.e., credit cards) and non-revolving (auto and all other loans, excluding real estate). The non-revolving portion accounts for the larger segment of consumer debt and this report has shown that, since the recession started in 2008, there has been a significant contraction of both types of debt. For example, the report shows that revolving debt dropped 12.00% YoY in April and declined 9.00% for 1Q 2010 YoY. Today’s report is expected to show a continuation of this trend with American consumers decreasing their borrowings in May by $2.30 billion.
Treasury prices continue to trade lower this morning as investors react to today’s better than expected Jobless Claims report. Currently, the 2-year note has declined 1/32 to yield 0.63% and the 5-year note has declined 5/32 to yield 1.81%. The 10-year note has lost 10/32 yielding 3.02% while the long bond has dropped 15/32 yielding 3.98%. For the record, the Department of Labor released its weekly initial jobless claims report which showed that first time claims dropped by 21,000 versus the previous week revised level of 475,000. Analysts were expecting a reading of 460,000. Additionally, continuing claims were lower than expectations by 187,000 at 4.413 million versus the expected 4.600 million. However, last week’s number was upwardly revised from 4.616 million to 4.637 million.
The less volatile 4-week average number of initial claims was 466,000, a slight decrease of 1,250 compared to the previous week. Until Jobless Claims decrease at a faster rate, the Fed will have less of an incentive to begin raising rates. Currently, there is no Fed Fund implied probability (computed by Bloomberg) that even reaches a 15% chance of a rate hike for the rest of 2010.
Additionally, Consumer Credit, a monthly measure of consumer debt, will be released this afternoon at 2:00 pm CDT. The report can be broken down into two categories: revolving (i.e., credit cards) and non-revolving (auto and all other loans, excluding real estate). The non-revolving portion accounts for the larger segment of consumer debt and this report has shown that, since the recession started in 2008, there has been a significant contraction of both types of debt. For example, the report shows that revolving debt dropped 12.00% YoY in April and declined 9.00% for 1Q 2010 YoY. Today’s report is expected to show a continuation of this trend with American consumers decreasing their borrowings in May by $2.30 billion.
Source: Bloomberg L.P. Chart by The Fixed Income Strategies Group RBC WM
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