Published Date: 3/5/2010 5:42:47 PM
Week in Review/Week Ahead
Treasuries saw another bumpy week, with trade fairly rangy through most of
the week, getting support from the unfolding drama in Greece and then crushed on
the payrolls report. Bond got the hurt put on even harder with the short end
leading the way off midday as the data helped add to the overall "improving"
economic picture and pointing toward rate hikes.
Trade saw an uptick in expectations for the Federal Reserve to move on a 25
basis point hike coming sooner rather than later, with September seen as "when
they will get serious." There have been rumblings out of the Fed that that is
the projected time frame they envision, but the "nail will be in the coffin" on
easy money once they start monkeying with the language in the statements in the
months ahead.
The bonds had little in the way of supply, but the sheer size in the week
ahead helped add to price pressure. There was some tempering of the initial
selling as the market still sees concerns over Greece (and assorted other
peripheral European Union members as well as the UK), but the issue has seemed
to have lost some of its sting. While the chatter over the moves by the
Government Sponsored Entities, specifically Fannie Mae, to try to quietly drain
some liquidity weighed on the short end, things will remain jittery until the
market thinks it has a handle on what sort of speed and magnitude these
maneuvers will take.
The 10-year was swung mildly compared to last week, with the yield running to
3.698% from 3.589% while the 2-year saw as hard as the previous week, seeing a
0.931% from 0.835%. The curve was run steeper after 2 sessions of fairly steep
flattening, with most maturity combinations headed out steeper, while the
2-10-year yield spread took a run back to 279 after tagging the narrowest levels
in a month early.
Week Ahead
The week ahead (hey, that's the title!) has a huge batch of at-record
supply pushing through, while global offerings will add to the already very
crowded mix. The data calendar is comparatively sparse while Federal Reserve
speakers will be (for the moment) following the pre-Federal Open Market
Committee "black out" period for official chatter.
The week starts with no data points of note, but will open with, OK, $26
billion 3-month bills and $28 billion 6-months. The rest of the week fills out
approx $31 billion 4-weeks (size announced Monday) along with $26 billion
1-years and $40 billion 3-years Tues day. Wednesday has an estimated $25 billion
cash management bills and $21 billion reopened 10-years. Finally Thursday caps
things with $13 billion reopened 30-years.
The market will be primarily concerned as to how well the 10-and-30-years go
off, with the past several auctions being hit or miss. Everyone is pretty sure
the 3-years will go off well, even if the last one didn't get off so hot, with
the yield demanded well above what had been anticipated. The more iffy, longer
dated offerings will be trickier, as the market has occasionally less
appreciation or appetite for the more lengthy maturities (anit that always the
truth though?). The February 10-year went off like a lead balloon, but, perhaps
it lowered the bar on expectations for this reopening (although, reopenings
already have a bit of a taint on them).
The data is fairly tame early with wholesale inventories and the treasury
budget Wednesday, the usual jobless claims and the trade balance Thursday, with
Friday getting the week's two biggies, retail sales, University of Michigan
sentiment and business inventories. Have a great weekend.
Beth Malloy
