Treasury prices in the intermediate and long end of the curve fell on Wednesday as investors exited the Treasury market in face of record low yields. This happened in spite of a successful auction of 7-year Treasuries at midday. For the record, the Treasury department auctioned $29 billion of 7-year Treasuries at a rate of 1.89% receiving bids totaling $88 billion for a 3.04 bid to cover ratio. Indirect bidders demanded half of the new securities; the level of foreign interest has typically been above 40. Direct bidders purchased 13% of the auction. By the end of the day the 2-year note remained unchanged at 0.43% while the 5-year declined 3/32 to yield 1.27%. The benchmark 10-year note declined 9/32 to yield 2.50%. Finally, the long bond declined 26/32 to yield 4.64%.
Today’s economic calendar presents the third release of 2nd Quarter 2010 GDP data, the Personal Consumption, the initial jobless claims report and the Chicago PMI. Treasury prices are lower this morning after it was reported that the economy did in fact slow down in 2Q 2010 to less than half the rate of growth reported for the previous quarter. The benchmark 10-year is currently down 3/32 to yield 2.49% and the 30-year is down 6/32 yielding 3.67%. The Commerce Department announced that Gross Domestic Product grew by only 1.70% in the second quarter of this year, versus an expected 1.60% but considerably lower that the 3.70% growth reported on the first quarter of 2010 and the 5.00% reported on the last quarter of 2009.
Today’s economic calendar presents the third release of 2nd Quarter 2010 GDP data, the Personal Consumption, the initial jobless claims report and the Chicago PMI. Treasury prices are lower this morning after it was reported that the economy did in fact slow down in 2Q 2010 to less than half the rate of growth reported for the previous quarter. The benchmark 10-year is currently down 3/32 to yield 2.49% and the 30-year is down 6/32 yielding 3.67%. The Commerce Department announced that Gross Domestic Product grew by only 1.70% in the second quarter of this year, versus an expected 1.60% but considerably lower that the 3.70% growth reported on the first quarter of 2010 and the 5.00% reported on the last quarter of 2009.
The economic slowdown was partially due to a rise in imports from 11.20% in Q1 to 33.50% in Q2. Also, gross private investment reported a 26.20% expansion mainly due to an 18.90% increase in fixed investments (3.30% reported in 1Q2010) plus a 17.20% change in nonresidential spending. Inventory levels rose $68.8 billion for the quarter, higher than the $44.1 billion increase reported in 1Q. Companies typically increase inventory levels in preparation for an increase in consumer demand; inversely, an increase would have indicated companies do not expect consumer demand to pick up significantly anytime soon. Finally, Personal Consumption, the biggest contributor to GDP, increased by 2.20% for the quarter, analysts had been expecting it to increase 2.00%. Consumption of durable goods was in line with the previous release at 6.80% but services increased 0.40% more than previously forecasted at 1.60%.
The Department of Labor showed a positive trend in Jobless claims when it released its weekly initial jobless claims report this morning showing that claims decreased slightly by 16,000 versus the previous week to 453,000, analysts had estimated last week’s jobless claims to remain at 460,000. Continuing claims were also lower than expected at 4.457 million versus the expected 4.473 million. The less volatile 4-week average number of initial claims was 458,000, a 6,250 drop from the previous period. Additionally, the Chicago Purchasing manager’s index was released at 8:45 am CT at 60.40. Economists were expecting this index to be 55.50 for September. This better than expected number signals improving conditions in the manufacturing sector as a reading over 50 represents an expansion in regional production.
No comments:
Post a Comment