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Turning point in jobs?


Sure they’re still cutting jobs, by nonfarm payrolls are shrinking at slower pace, down only 247K in July, and the unemployment rate actually fell to 9.4% from 9.5%. With other data showing a tentative turning point in housing and manufacturing moving toward expansion, this is starting to feel like the real deal.

Sure July is only one month, but the Treasury market isn’t waiting. The 10-year benchmark is down nearly a point to yield 3.88%, bringing the big 4.0% threshold back into focus. Question now will be whether investors start fearing a rise in yields will quash the economic growth.

Just another record amount of Treasurys


I’m just getting a chance to look at the Treasury’s quarterly refunding announcement now, and no surprise here. It’s a record amount at $75 billion that will start to hit the market next week. All the details are here. Its decision to increase TIPs issuance also comes as no surprise after the Wall Street Journal flagged it here.

Given the gains in the Treasury market today on weaker-than-expected data on the service sector, it doesn’t look like the mountain of the supply, with much more to come, is weighing too heavily on the Treasury market. But like many things in the financial markets, it won’t matter until suddenly it does. Improving economic conditions will allow bond investors to narrow their focus back on the supply, but given today’s data, which also included a 371K decline in private sector jobs, and the looming monthly employment report from the BLS on Friday, fears about the economy still rule.

Running short on ammunition at the Fed?


Barring another serious economic stumble, it seems that the Fed is not going to offer much more credit easing than already planned. The minutes of the June meeting of the FOMC suggested a solid resistance to stepping up purchases of either mortgage backed securities or Treasury bonds.

On Treasuries, the committee argued that a small increase in Treasury purchases would do little to push down rates. Meanwhile a large increase could heighten fears that the Fed intended to monetize the government’s debt.

Markets knocking the stuffing out of the optimists


Treasurys are up after a stellar auction of $19 billion reopened 10-year notes, stocks are floundering as investors worry about the economy and earnings season. More and more it feels like the pessimists have decisively turned the tide.

David Gaffen over at the Reuters Global Investing blog, sums it up best:

Earnings are expected to fall about 36% once again, and investors in recent weeks have finally cottoned to the idea that vaulting over low bars really isn’t much to get optimistic about. If the market is truly going to turn higher, it will depend on the quality of earnings, and there, some aren’t so optimistic. Mike Lewitt, president of Harch Capital Management, said, “I don’t think there’s a lot of revenue growth, just shrinkage – basically everybody is shrinking across the board and that’s what we’re seeing.”

Global market cross-currents, Fed in focus


With the big event for the week – the outcome of the Federal Reserve’s Federal Open Market Committee – not due until Wednesday, global markets are left to focus on number of cross currents that are weighing on the stocks and oil and bolstering government bonds and the dollar.

The World Bank, which warned that the prospects for global economy continued to be “unusually uncertain,” downwardly revised its 2009 outlooks for Japan,  the Euro Zone, and the United States. The organization expects global output to shrink by 2.9% this year , worse than an initial estimate of 1.7%.

Here we go again…Treasurys, mortgages go wild


Mix up a little supply, some better-than-expected jobs data and mortgage-related hedging and we’re heading back to where we were last week. Let the volatile times roll on. The 10-year Treasury yield is off more than a point to yield 3.84% – still well below the 4% mark that had investors in an uproar last week, but it serves as a reminder of just how fast this market can move.

Mortgage spreads, meanwhile are moving in the same direction – never a good sign since it increases the pressure on mortgage rates homeowners pay. IFR has reported heavy selling in the agency mortgage market from a variety of sources including those that are dumping mortgage bonds (and most likely Treasury bonds) as they try to hedge away the impact of rising yields on their portfolios.

Alternative to the dollar? Not so fast


It’s hard to get away from the steady drumbeat of comments calling for diversification away from the dollar. On Tuesday, they’ll be plenty of opportunity for more as Brazil, Russia, India and China – the so-called BRIC nations – meet in Yekaterinburg, Russia for their first official summit. A top Kremlin official, however, said discussing a new reserve currency will not be on the agenda. Russia and China policy makers in particular have called for an alternative to the greenback, not surprising given their sizable holdings of dollar-denominated assets.

But like all things, setting up an alternative to the dollar will take time, and there’s no use talking down the U.S. dollar-denominated holdings before there’s something else to leap into.

Key support in Treasurys holding


Despite momentum toward higher yields, the key support level of 4% on the 10-year Treasury note is still holding after two attempts to break through. A breach of that level could ignite another round of selling with a potential added push from mortgage investors who need to shed long-term securities like Treasurys to hedge their holdings in a rising rate environment. 10-year currently around 3.95%, down slightly from the 3.99% yield paid when the note was reopened Wednesday.

Treasury yields all the rage


A plethora of articles are circulating this morning as the handwringing intensifies whether the rise in U.S. Treasury yields – the world’s debt benchmark – will kill the green shoots of an economic recovery.  Wall Street Journal weighs in here and the FT here and here. All eyes will be on today’s $11 billion reopening of the 30-year bond to see if the hammering continues.  Auction results due out around 1 pm and can be found here.

Supply matters in Treasurys


If there was any question, Wednesday’s auction of $19 billion Treasury 10-year notes shows that supply matters. The reopened notes priced with a yield of 3.99%, up steeply from the 3.19% yield on the notes issued just one month before.

The spectacular rise in Treasury yields in recent weeks has caused a round of speculation that the U.S. economy is on the cusp of recovery. Earlier this week, talk grew louder that the market was signaling a rate increase from the Federal Reserve.