Fixed Income Update
The bond market continues to face selling pressure this afternoon following a choppy morning session which included higher-than-expected July PPI and slightly better-than-expected July Housing Starts. Freddie and Fannie jitters are likely to keep the bond market on edge, especially after Freddie’s $3bln 5yr auction today that yielded 113bps over Treasuries — the highest spread in over 10 years thanks to a considerable reduction in demand from central banks and Asian investors.
The 10yr, down 0.15% to 116-07, is trading near session lows but remains well within its upward trend starting July 23. The 30yr, down 0.35% 117-16, is performing similar to the 10yr with the 21- and 200-day moving averages at convergence under price at 115-21.
The yield on the 3oyr is up 3bps to 4.47%, the 10yr yield is up 2bps to 3.84%, and the 2yr yield is marginally lower at 2.32%. The short end of the curve is mixed with the 4week bill yield up 3bps to 1.73% and the 6month bill yield down 8bps to 1.92%.