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Monday, August 24, 2009

Fixed Income Recap


Yields jumped 10 basis points or more across the Treasury curve as better than expected existing home sales data drove investors out of the safety trade. New home buyers rushing to make the November 30 cutoff for the $8000 credit and foreclosure sales helped boost the number that posted a 7.4% increase in July, its 4th straight monthly increase.

Before Friday, yields had been steadily creeping to the lower end of the current range – helped by positive news on the supply front and increased Treasury demand from overseas. Bernanke’s comments also reaffirmed the FOMC’s decision to slow down and bring to an end the Treasury purchasing program, saying again that, “Economic activity appears to be leveling out”. The implementation of QE by the Fed was a true crisis decision, so its unwinding should be seen as a response to improvements in the credit markets, not necessarily an immediate rebound in economic growth.


Cliff J. Reynolds Jr., Investment Analyst

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