BondSquawk

By Maulik Mody – Bondsquawk.com

December 13, 2010

Treasuries rose today after a federal judge ruled against the US health care law mandate. The slight increase in stock prices today was being attributed to the growing investor confidence as the Fed purchases securities to increase inflation expectations and reduce unemployment. The price of insuring against US corporate debt declined for a ninth straight day, signs that investor risk appetite may be improving.

Interest Rates

Treasuries gained as yields fell across the curve lead by the front end as the 2-Yr note traded 6 bp lower at 0.58%. The 5-Yr gained the most pushing its yield 10 bp lower to 1.88%. The benchmark note also gained as its yield fell 4 bp to 3.27%. The Long Bond suffered the most as its yield narrowed 2 basis points to 4.41%.

Inflation expectations, as seen by the difference in yields of the 10-Yr Treasury and 10-Yr inflation indexed bonds (TIPS), widened 3 basis points to 2.20% as the Fed’s purchase of securities increased inflation expectations.

Across the Atlantic, while Germany Bunds and France’s bonds were mostly flat,UK Gilts rallied as the yield on the 5-Yr fell 11 bp to 1.88%. Bonds gained across most peripheral nations. 5-Yr Greece bonds traded 23 bp lower at 12.13%. Portugal and Spain 5-yr bonds shed 4 and 3 bp respectively to end at 5.03% and 4.66%. Ireland’s bond fell as 5-Yr yield climbed 5 bp to 6.93%.

Across the Capital Markets

Stocks in the US were mixed. Dow Jones advanced 0.2% to 11428.56. S&P ended flat at 1240.46. NASDAQ eased 0.5% to 2624.91. The VIX index fell slightly to 17.55.

The dollar DXY index, which measures the performance of the dollar against 6 major currencies across the world, fell 0.9% to 79.308. Euro gained against the greenback to 1.3391 and the British Pound strengthened too, ending at 1.5862.

Gold spot price increased by $8 to 1394.18 per ounce. Crude price advanced to 88.61.

By Maulik Mody – Bondsquawk.com

December 9, 2010

Long term treasuries reversed their losses as the 30-Yr auction today met with strong demand. Reports showed that initial jobless claims fell for the week ending December 4 and wholesale inventories grew in October. Stocks inched up slightly higher as the S&P index reached its highest level in nearly two years.

Interest Rates

The yield curve flattened as Treasuries in the longer end of the curve rallied while the belly region underperformed. The benchmark note rallied after a two-day slump and traded last at 3.20%, 7 bp below yesterday’s close. The Long Bond also gained after the auction and pushed its yield 6 bp lower to 4.40%. The belly of the curve was lifted slightly as the yield on the 5-Yr inched up a basis point to 1.89%. The 2-Yr gained slightly and traded a basis point lower at 0.62%.

Inflation expectations, as seen by the difference in yields of the 10-Yr Treasury and 10-Yr inflation indexed bonds (TIPS), narrowed by 6 basis point to 2.15S%.

Across the Capital Markets

Stocks ended slightly higher. While the Dow Jones Industrial Average ended flat, the S&P increased 0.4% to 1233.00. NASDAQ gained 0.3% to end the day at 2616.67. The VIX Volatility fell 0.49 points to 17.25.

The dollar strengthened slightly as the DXY index gained slightly to 80.032. Euro fell marginally against the greenback to 1.3239. The cable (GBP/USD) weakened to 1.5771.

December 9, 2010

Initial jobless claims fell to 421k the week ending Dec 4 from 438k on a seasonally adjusted basis. However the Labor Department stressed that this is the largest seasonal week of the year as non-adjusted claims jumped to 582k from 413k owing to a surge in filings after the Thanksgiving holiday which shut down insurance offices. In addition claims are rising owing to the seasonal layoffs of construction workers, something the seasonal factors may have trouble getting right after the decimation in the housing sector which has altered activity patterns in construction.

By Maulik Mody – Bondsquawk.com

December 6, 2010

Stocks eased slightly after their rally last week and Treasuries advanced after Bernanke stated in an interview recently that the Fed will take more steps to reduce unemployment in the sluggish economy. He also indicated that the Fed will purchase more than $600 billion of Treasuries previously decided if the need to sustain the recovery is perceived.

Gold jumped to another record high as Bernanke’s indication of pumping more money in the economy eroded investor confidence in currencies. With the euro-zone sovereign debt crisis and US’s slowing economy, countries are trying to debase their currency and as long as the currency war persists, the gold market will continue to be bullish.

Interest Rates

Treasury yields slipped across the curve as investors concerned about the fate of the US economic recovery parked funds in safe assets. The belly of the curve flattened the most as Treasuries maturing 5 years from now rallied the most. The 2-Yr note gained to trade last at 0.42%, 5 bp lower than last week. The 5-Yr rallied the most as its yield sank 10 bp to 1.52%. Yield on the benchmark 10-Yr bond fell 8 bp to 2.93%. The 30-Yr last traded 7 bp lower at 4.24%.

Inflation expectations, as seen by the difference in yields of the 10-Yr Treasury and 10-Yr inflation indexed bonds (TIPS), narrowed by a basis point to 2.19%.

Yields ended lower among developed nations in Europe. 5-Yr German Bunds rallied to push its yield 8 bp lower to 1.74%. France’s 5-Yr bonds traded 7 bp lower at 2.01%. 5-Yr UK Gilts advanced as its yield fell 2 bp to 2.06%.

While yields fell among developed nations, yields ended higher across the Atlantic. Portugal’s 5-Yr bond fell to push its yield 21 bp higher to 4.55%. Ireland and Italy’s 5-Yr yields increased 3 and 4 bp to 7.15% and 3.39% respectively. Greece’s 5-Yr fell as its yield jumped 23 bp higher to 12.13%. Spain’s 5-Yr yield also gained 9 bp to 4.28%.

Across the Capital Markets

Stocks ended slightly lower today. Dow Jones Industrial Average fell 0.2% to 11362.19, while the S&P eased 0.1% to 1223.12. NASDAQ gained slightly to end 0.1% higher at 2594.92. The VIX Volatility was flat at 18.02.

The dollar strengthened slightly as the DXY index gained 0.3% to 79.632. Euro fell 0.8% against the green back to 1.3308. The cable (GBP/USD) fell slightly to 1.5715.

Gold rallied to a new high of 1423.75. Crude spot price increased slightly to 89.38.

December 3, 2010

The November employment report came in weaker than expected with a 39k gain in payrolls after an upward-revised 172k increase in October. Private hiring increased 50k after a 160k gain, the weakest reading since the spring although it would appear there are some seasonal adjustment issues as retail hiring rose 13k in October and dropped 28k in November. The October reading appears to have been firmer than the underlying trend while the November reading is likely below trend, smoothing through this the 3-month average of private hiring slowed to 107k from 138k but has been tracking just above 100k since August. The report also highlights some of the seasonal adjustment problems that have led to a downtrend in initial jobless claims. These difficulties have meant that claims have been providing unreliable signals throughout this year. The household survey has been considerably weaker than the payroll survey showing a loss of 173k jobs in November after a 330k loss in October. With labor force participation steady at 64.5% the job loss in the household survey led the unemployment rate to jump to 9.8% from 9.6%, the highest since April highlighting the underlying slack in the economy that motivated the Fed to initiate QE2. The U6 unemployment rate held steady at 17.0%. Average hourly earnings were flat leading the annual pace to slow to 1.6% from 1.7% and aggregate hours worked ticked up 0.1% after a 0.4% gain suggesting slower gains in wage and salary income. The report highlights the headwinds facing the US economy as the boost from inventories fades and other sectors are slow to pick up the slack.

Courtesy: BNP Paribas