Brian Edmonds Comments: Treasuries Decline As Stock Gains Trim Demand For Safest Assets
July 19, 2010, Bloomberg BusinessWeek
Treasuries fell, pushing two-year yields up from a record low level, as gains by stocks damped demand for the relative safety of government debt.
Ten-year notes slid for the first time in four days. Bonds earlier pared losses as stocks fluctuated after data showed an index of home-builder confidence fell to the lowest level in 15 months, adding to signs the housing market's recovery will be slow. Federal Reserve Chairman Ben S. Bernanke is scheduled to give his semiannual report on the economy to Congress this week.
“Stocks being positive has helped to push Treasuries down,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. The home-builder data “gave you reasons to want to own the market, but it was met by sellers who were taking profits.”
The 10-year note yield rose 4 basis points, or 0.04 percentage point, to 2.96 percent at 4:35 p.m. in New York, according to BGCantor Market Data. It earlier touched 2.91 percent, the lowest level since July 7. The 3.5 percent security maturing in May 2020 fell 3/8, or $3.75 per $1,000 face amount, to 104 17/32.
The two-year note yield increased 1 basis point to 0.59 percent. It fell earlier to 0.5765 percent, tying the record low set on July 16.
The Standard & Poor's 500 Index rose 0.6 percent after falling as much as 0.4 percent earlier. It tumbled 2.9 percent on July 16.
About $132 billion of Treasuries were traded today as of 4:03 p.m. in New York, according to Icap Plc, the world's largest interdealer broker. Average full-day volume for 2010 is $228 billion.
“People will be meandering around until we get Bernanke's testimony,” said Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, one of the 18 primary dealers that trade with the U.S. central bank. “Housing will still be a drag on the economy.”
The Fed chairman is scheduled to report on the economy to the Senate Banking Committee on July 21 and the House Financial Services Committee the next day.
“Look for questions on deflation and double-dips -- words that have seemingly overnight become part of popular vernacular,” Tom Porcelli, senior economist in New York at primary dealer Royal Bank of Canada, wrote in a note to clients. “While the chairman is likely to strike a dovish tone, we don't expect he'll make significant waves, either.”
U.S. central bankers at a policy meeting last month lowered their forecast for 2010 growth to 3 percent to 3.5 percent, from 3.2 percent to 3.7 percent, according to minutes issued last week. Gross domestic product contracted 2.4 percent last year.