The market ignored positive economic data for the second day in a row yesterday as stocks sold off and Treasuries rallied. The two-year is to thank for the steeper curve as it has rallied from 1.05% last Thursday to end yesterday at .91%. I usually prefer to show shifts in the curve with a graph, but some seem to have trouble reading them. Below shows the same change, just in table form.
The biggest news of the day will be the release of the FOMC minutes from the Aug 12 meeting. The market will be fixated on the Fed’s comments on the securities purchase programs, prospects for inflation, economic activity and the dollar. More on this in tomorrow’s recap.
The New York Fed purchased $5.6 billion in 3-4 year Treasuries yesterday and has yet to schedule the next batch of operation dates. The Fed has bought $276 million worth of Treasuries to date, so the next announcement will almost surely have to show some sort of slowing down. Most of the speculation is for the Fed to go to one Treasury operation each week, similar to the way they have bought Agency debt throughout the entire quantitative easing campaign.
Cliff J. Reynolds Jr., Investment Analyst
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