Treasury prices rose marginally on Wednesday as fixed income investors reacted to a 10-year T-note auction and equities showed a strong performance for the day. For the record, the Treasury department re-opened $21 billion of a 10-year security and received bids totaling $62.8 billion, a bid to cover ratio of 2.99. Indirect bidders acquired 41.5% of the new securities. Almost 10% of the bids that were filled came in at the high yield of 2.47%. The lowest yield submitted was 2.35% with a median yield of 2.42%. By the end of the day the 2-year note ended flat to yield 0.36% while the 5-year note gained 5/32 to yield 1.11%. The benchmark 10-year rose 3/32 to yield 2.42% and the long bond increased 1/32 in price to yield 3.82%.
Treasury prices on the short and intermediate range of the curve are declining this morning as today’s economic releases showed a higher than expected increase in the Producer Price Index. The 2-year note is trading 1/32 lower to yield 0.37% while the 5-year note has dropped 3/32 to yield 1.14%. The 10-year note is 1/32 lower at 2.42%. The 30-year bond, which traditionally is negatively affected to sudden increases in inflationary expectations, is trading higher as market participants are preparing for today’s reopening of a $13 billion 30-year bond auction taking place at 12:00 pm CDT. Currently, the long bond has improved by 9/32 to yield 3.80%. The Producer Price Index was released with higher than expected “headline” level on a Month to Month basis at 0.40% versus the anticipated change of 0.10%. Meanwhile, Core PPI, which does not include the volatility in the food and energy sectors, increased in line with expectations at 0.10% for the month of September. On a year-over-year basis, PPI rose 4.00% or 0.30% higher than expected. Core PPI YoY also increased more than forecasted at 1.60% versus 1.50%.
Additionally, the Commerce Department announced that the Trade Balance widened sharply in August by 8.80% to -$46.30 billion versus the expected -$44.00 billion. Although both imports and exports increased during that period, the rate of imports increase was considerably greater from $196.11 billion in July to $200.22 billion in August. So far this year, the trade deficit is running at an annual rate of $502.5 billion, up 34 percent from the $374.9 billion deficit for all of 2009. Finally, the Department of Labor released its weekly Initial Jobless Claims report showing that first time claims were above expectations at 462,000; analysts’ expectations were for an increase of 445,000 for the period. However, Continuing Claims was lower than the forecast at 4.399 million versus the expected 4.450 million. The previous’ month data was upwardly revised to 4.511 million. The Initial Jobless claims 4-week moving average increased by 2,250 to 459,000.
Treasury prices on the short and intermediate range of the curve are declining this morning as today’s economic releases showed a higher than expected increase in the Producer Price Index. The 2-year note is trading 1/32 lower to yield 0.37% while the 5-year note has dropped 3/32 to yield 1.14%. The 10-year note is 1/32 lower at 2.42%. The 30-year bond, which traditionally is negatively affected to sudden increases in inflationary expectations, is trading higher as market participants are preparing for today’s reopening of a $13 billion 30-year bond auction taking place at 12:00 pm CDT. Currently, the long bond has improved by 9/32 to yield 3.80%. The Producer Price Index was released with higher than expected “headline” level on a Month to Month basis at 0.40% versus the anticipated change of 0.10%. Meanwhile, Core PPI, which does not include the volatility in the food and energy sectors, increased in line with expectations at 0.10% for the month of September. On a year-over-year basis, PPI rose 4.00% or 0.30% higher than expected. Core PPI YoY also increased more than forecasted at 1.60% versus 1.50%.
Additionally, the Commerce Department announced that the Trade Balance widened sharply in August by 8.80% to -$46.30 billion versus the expected -$44.00 billion. Although both imports and exports increased during that period, the rate of imports increase was considerably greater from $196.11 billion in July to $200.22 billion in August. So far this year, the trade deficit is running at an annual rate of $502.5 billion, up 34 percent from the $374.9 billion deficit for all of 2009. Finally, the Department of Labor released its weekly Initial Jobless Claims report showing that first time claims were above expectations at 462,000; analysts’ expectations were for an increase of 445,000 for the period. However, Continuing Claims was lower than the forecast at 4.399 million versus the expected 4.450 million. The previous’ month data was upwardly revised to 4.511 million. The Initial Jobless claims 4-week moving average increased by 2,250 to 459,000.
Source: Bloomberg L.P. compiled by the Fixed Income Strategies Group RBC WM
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