By Jessica Shanahan, Premier Lending LLC adapted from the Shirmeyer Rate Market Report.
For each of the past 6 sessions, the closing yield on 10yr Treasuries (our proxy for "bond markets") has been no higher than the previous session. We can't say each day has improved because Monday and Tuesday closed at exactly the same levels.
What's with all the positivity?
First of all, it's not really that overwhelming considering yields were lower two weeks ago and lower again two weeks before that. Indeed the longer term range has been sideways to slightly higher (but mostly sideways), and the past 6 days have simply represented a move from the weaker end of that range to the stronger end.
There are several potential motivations for this apart from a simple bounce inside the range. One likely suspect is the Quarter-end reallocation of investment portfolios. Currently, it looks like some of the sharper moves in stocks have been well-connected with sharper moves in bonds.
Apart from that, there is also the matter of last week's FOMC events. They did shake things up a bit, but the effects are most noticeable for their disparate impact on yield curve constituents. That means that 2yr through 30yr Treasuries have been impacted in very different ways. If 2013 was the era for the longer maturity bonds to freak out, 2014, thus far, is the shorter end's turn. The implication is that some of the resilience or strength on the part of 10yr yields is simply due to the fact that they're NOT 2-5yr yields, as the latter have been hammered, relatively speaking.
We locked at the close yesterday, may have been a little early but next week the March employment report is out on Friday with early forecasts of 190K increase in non- farm payrolls. Interest rates continue to trade in a narrow pattern; the treasury markets somewhat supported by safety moves over the uncertainties on Russia/Ukraine developments. Other than that issue the long end of the curve has little support given the Fed’s stance, ending the monthly bond and MBS purchases and talking about increasing interest rates sooner than previously expected.
PRICES @ 10:10 AM
10 yr note: -1/32 (3 bp) 2.65% unch
5 yr note: -2/32 (6 bp) 1.54% +2 bp
2 Yr note: unch 0.35% unch
30 yr bond: -2/32 (6 bp) 3.59% unch
Libor Rates: 1 mo 0.155%; 3 mo 0.233%; 6 mo 0.331%; 1 yr 0.557%
30 yr FNMA 4.0 Apr: @9:30 104.59 +6 bp (+57 bp frm 9:30 yesterday)
15 yr FNMA 3.0 Apr: @9:30 103.67 +7 bp (+48 bp frm 9:30 yesterday)
30 yr GNMA 4.0 Apr: @9:30 105.75 +3 bp (+51 bp frm 9:30 yesterday)
Dollar/Yen: 101.43 -0.41 yen
Dollar/Euro: $1.3911 +$0.0043
Gold: $1387.30 +$14.90
Crude Oil: $98.76 +$0.56
DJIA: 16,132.97 +24.08
NASDAQ: 4257.10 -3.32
S&P 500: 1849.38 +3.04
More next week, have a great weekend!
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