Bond Expert: Wednesday Wrap

May 15, 2008

Prices of Treasury coupon securities took a roller coaster ride Wednesday and are finishing the session with mixed results. The yield on the benchmark 2 year note is 4 basis points higher and is closing at 2.51 percent. The high yield on the issue was 2.59 percent. The yield on the benchmark 5 year note jumped 3 basis points to 3.20 percent. The high yield on this issue today was 3.27 percent. The benchmark 10 year note closed unchanged at about 3.92 percent and the high yield on this issue was 3.97 percent. The 30 year bond closed 2 basis points lower in yield at 4.62 percent. The high yield on this issue was 4.67 percent. The high yields were attained early in New York trading prior to the release of the CPI report.The 2year/10 year spread is closing the day at 141 basis points.

Dealers report that it was a very active trading day with tremendous two way flow. One dealer noted chunky buying of benchmark 2 year through 10 year paper by central banks. The same dealer noted that the central banks were also active buyers of spread product. Another trader said he could not characterize the flow thematically but said that end users were as active as they have been in some time. He observed a very large seller of the 5 year note, a substantial buyer of long principals and a chunky buyer of 2 year notes.

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