Treasury yields climbed across the entire curve in Thursday’s trading. The thirty-year auction results were less than desirable, but Treasuries were struggling before stocks even opened so we can’t blame it all on supply. Profit taking after the recent rally is likely to blame for the selloff, considering stocks were mixed and the morning’s economic data, which included a new record on Continuing Jobless Claims, probably kept yields from rising even further if anything.
The $11 billion thirty-year reopening auction came in at 4.30%, two basis points higher than the market, and a bid/cover of 2.36 right at the four auction average. The bonds were issued at the high yields of the day as the 30-year rallied to 4.26% by the close of stocks, only to sell off again in the late afternoon.
As expected, England’s central bank left their version of the Fed Funds Target Rate unchanged but surprised the market when they left their commitments to purchase government debt, or queasing, unchanged at £125 billion, or $200 billion for those comparing it to our $1.25 trillion program. The market consensus was for the Bank of England to increase their purchases by £25 billion to £150 billion but the committee decided to stand pat and remarked that they will need only another month to complete the £15 billion or so they have left. In true major central bank fashion they were not explicit about any future increases, but similar actions coming from the U.S. Federal Reserve combined with the BOE’s actions yesterday may begin to reverse the market’s expectation for more quantitative easing globally.
The Fed lagged behind its usual pace for MBS purchases this week with only $17.05 in net purchases compared to their weekly average of $23.8 billion. The July 4th holiday translated into one less trading day during the period so that explains the lower number.
Cliff J. Reynolds Jr., Investment Analyst
The $11 billion thirty-year reopening auction came in at 4.30%, two basis points higher than the market, and a bid/cover of 2.36 right at the four auction average. The bonds were issued at the high yields of the day as the 30-year rallied to 4.26% by the close of stocks, only to sell off again in the late afternoon.
As expected, England’s central bank left their version of the Fed Funds Target Rate unchanged but surprised the market when they left their commitments to purchase government debt, or queasing, unchanged at £125 billion, or $200 billion for those comparing it to our $1.25 trillion program. The market consensus was for the Bank of England to increase their purchases by £25 billion to £150 billion but the committee decided to stand pat and remarked that they will need only another month to complete the £15 billion or so they have left. In true major central bank fashion they were not explicit about any future increases, but similar actions coming from the U.S. Federal Reserve combined with the BOE’s actions yesterday may begin to reverse the market’s expectation for more quantitative easing globally.
The Fed lagged behind its usual pace for MBS purchases this week with only $17.05 in net purchases compared to their weekly average of $23.8 billion. The July 4th holiday translated into one less trading day during the period so that explains the lower number.
Cliff J. Reynolds Jr., Investment Analyst
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