Treasury prices fell on Tuesday as investors exited both Treasuries and Equities and bought precious metals such as Gold, which rose to a record $1,425. The erosion in the price of Treasuries continued after a lukewarm Treasury auction. The Treasury department auctioned $24 billion of 10-year Treasuries at a rate of 2.636% receiving bids totaling $67.18 billion for a 2.80 bid to cover ratio, which was lower than the 3.12 average seen in the previous three auctions. Indirect bidders demanded over half of the new securities at 57.00% while direct bidders purchased 9.00% of the auction The Treasury department will finalize its auctions for the week today by selling $16 billion of 30-year securities. By the end of the day the 2-year note dropped 2/32 to yield 0.44% while the 5-year note declined 20/32 to yield 1.25%. The benchmark 10-year note declined 29/32 to yield 2.66% and the long bond seemed to fall off a cliff dropping 2 points 2/32 to yield 4.25%.
Treasury prices are reacting to this morning’s economic releases. The 2-year note has dropped another 1/32 yielding 0.43% while the 5 year note is trading 5/32 lower to yield 1.26%. On the other hand, the benchmark 10-year has increased 2/32 to yield 2.67% while the long bond has moved 7/32 higher to yield 4.23%. The Commerce Department announced that the trade gap between imports and exports shrank in September to -$44.0 billion as a weaker dollar pushed exports to its highest level in 24 months. Analysts had expected a bigger deficit of $45.0 billion. This difference was due to the fact that total exports reached $154.09 billion, a 0.30% MoM increase and the highest level since August 2008. Meanwhile, total imports dropped 1.00% to $198.098 billion.
Source: Bloomberg L.P. compiled by the Fixed Income Strategies Group RBC WM
The lower than expected trade imbalance can be attributed to a jump in foreign demand for civilian aircrafts (+36.00%), consumer goods (+1.10%) and food and beverages (+5.10%). Although the trade deficit can be considered a lagging indicator, this lower than expected imbalance supports the desire of the Federal government to boost GDP growth by other means beyond consumer spending. Therefore, since net exports is a component of GDP, a lower than expected number would have a positive impact on the second revision for 2Q2010 GDP scheduled to be released on November 23rd. The estimate has already been upwardly revised to 2.50% from 2.00%.
In another encouraging economic release for the day, the Department of Labor showed a positive trend in Jobless Claims when it released its weekly report this morning. According to the report, weekly claims decreased by 24,000 versus the previous week to 435,000; analysts had estimated last week’s jobless claims to remain at 450,000. Continuing claims were also slightly lower than expected at 4.301 million versus the expected 4.305 million. The less volatile 4-week average number of initial claims saw a 10,000 drop from the previous period to 446,500. Finally, the Bureau of Labor Statistics of the U.S. Department of Labor reported this morning that the U.S. Import Price Index rose 0.90% in October, missing analysts’ estimates of a 1.20% increase for the period. The previous month’s data was revised to -0.10% instead of -0.30%. The annual change was also slightly lower than expected at 3.60% versus the 3.90% estimate. A lower than expected Monthly Import Price Index should help to mitigate inflationary concerns for the time being.
Treasury prices are reacting to this morning’s economic releases. The 2-year note has dropped another 1/32 yielding 0.43% while the 5 year note is trading 5/32 lower to yield 1.26%. On the other hand, the benchmark 10-year has increased 2/32 to yield 2.67% while the long bond has moved 7/32 higher to yield 4.23%. The Commerce Department announced that the trade gap between imports and exports shrank in September to -$44.0 billion as a weaker dollar pushed exports to its highest level in 24 months. Analysts had expected a bigger deficit of $45.0 billion. This difference was due to the fact that total exports reached $154.09 billion, a 0.30% MoM increase and the highest level since August 2008. Meanwhile, total imports dropped 1.00% to $198.098 billion.
Source: Bloomberg L.P. compiled by the Fixed Income Strategies Group RBC WM
The lower than expected trade imbalance can be attributed to a jump in foreign demand for civilian aircrafts (+36.00%), consumer goods (+1.10%) and food and beverages (+5.10%). Although the trade deficit can be considered a lagging indicator, this lower than expected imbalance supports the desire of the Federal government to boost GDP growth by other means beyond consumer spending. Therefore, since net exports is a component of GDP, a lower than expected number would have a positive impact on the second revision for 2Q2010 GDP scheduled to be released on November 23rd. The estimate has already been upwardly revised to 2.50% from 2.00%.
In another encouraging economic release for the day, the Department of Labor showed a positive trend in Jobless Claims when it released its weekly report this morning. According to the report, weekly claims decreased by 24,000 versus the previous week to 435,000; analysts had estimated last week’s jobless claims to remain at 450,000. Continuing claims were also slightly lower than expected at 4.301 million versus the expected 4.305 million. The less volatile 4-week average number of initial claims saw a 10,000 drop from the previous period to 446,500. Finally, the Bureau of Labor Statistics of the U.S. Department of Labor reported this morning that the U.S. Import Price Index rose 0.90% in October, missing analysts’ estimates of a 1.20% increase for the period. The previous month’s data was revised to -0.10% instead of -0.30%. The annual change was also slightly lower than expected at 3.60% versus the 3.90% estimate. A lower than expected Monthly Import Price Index should help to mitigate inflationary concerns for the time being.
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