Fixed Income Update
With no economic data with which to work, the bond market continues to be guided by banking sector fears and the uncertain future of GSE’s Freddie and Fannie. The US Treasury’s standoff approach to the matter has done little to alight fears as the bond market has kept a strong bid tone while shares of Freddie and Fannie have each dropped more than 30% so far this week. Yesterday, Freddie’s 5yr note auction was awarded at an alarming 113 bps over treasuries which indicates a concerning need for liquidity.
The 10yr, up 0.2% to 116-16, is trading in the upper portion of today’s range and is in lien with the coincident range from the first half of April. The 30yr, up 0.35% to 117-31, continues to show consolidation under 118.
Bond yields are lower across the board with the 30yr down 2bps to 4.43%, the 10yr yield down 2bps to 3.8% and the 2yr down 1bp to 2.28%. The short end of the curve is also higher, with the 4week bill yield down 2bps to 1.76%, the 3month bill yield down 5bps to 1.715 and the 6month bill yield down 3bps to 1.88%.