Fixed Income Recap

Treasuries
The two-year finished the day down 3/64, and the ten-year was lower by 35/64. The benchmark curve was six basis points steeper on the day, and currently sits at +161 bps, a basis point flatter for the week. A basis point represents .01%.

$17.8 billion of the on-the-run ten-year Treasury note was auctioned today with a bid to cover ratio of 2.49 and a yield of 2.95%. The ten-year finished the day up 1/4 from the close of the auction to yield 2.92%.

MBS
The Federal Reserve Bank of New York announced $30.4 billion in agency MBS purchases for the seven day period ending yesterday. The Fed has purchased a total of $333 billion in agency MBS to date with a daily average of $4.75 billion. Wow!

Credit
Credit spreads moved tighter today on positive earnings guidance released by Wells Fargo (ticker WFC). The better than expected news from the financial sector helped the overall market for credit today. Wells officially announces earnings on the 22nd, but today’s earnings guidance (55 cents per share) was more than double the streets estimate. The company sighted better than expected loan performance and increased activity in their mortgage refinancing business; signs that credit conditions may be turning and people are taking advantage of the lower mortgage rates. With prices down all across bondland CSJ (1-3 year IG credit) and LQD (Intermediate IG Credit) were up .47% and .67% respectively.

Have a great evening.

Cliff J. Reynolds Jr.
Junior Analyst