Fixed Income Recap

Thin Markets Hurt Auction
Today’s $28 billion five-year auction suffered from a thin market and the rest of the Treasury market suffered as a result. However, it is difficult to draw anything meaningful from market movements during the holiday season when most trading desks are half staffed. The 5-year was off about a half point in price after the auction before rallying back in afternoon trading to yield about 1.44% late in the day.

Mortgages have widened to comparable Treasuries over the past week, but again, volatility must be taken with a grain of salt given the thin markets at year end. The spread between thirty-year MBS and the 10-year Treasury has widened about 30 basis points from this time last week.


Cliff J. Reynolds Jr.
Junior Analyst