Interest Rate Roundup

Thursday, June 12, 2008

How 'bout those bonds

I'm checking in briefly again in between engagements and once again, my focus has to be the interest rate picture. Yields continue to zoom higher amid stronger-than-expected economic data and hawkish talk from Federal Reserve officials. This is exactly the kind of market move I've been expecting and talking about for some time. Some more details on the bond market action from Bloomberg:

"Treasuries fell, pushing the yield on the benchmark 10-year note to the highest level this year, after a larger-than-expected gain in retail sales bolstered the case for the Federal Reserve to boost interest rates.

The yield on the 10-year note has climbed 90 basis points since March 17, when the Fed backed JPMorgan Chase & Co.'s bailout of Bear Stearns Cos., a sign to traders that the seizure in credit markets caused by the subprime mortgage collapse was ending. Losses in Treasuries accelerated after policy makers signaled they would stop cutting interest rates and Fed Chairman Ben S. Bernanke said June 3 that "we are attentive to the implications of changes in the value of the for inflation and inflation expectations.''

"The story right now is purely an inflation story,'' said David Glocke, who manages $75 billion of Treasuries at Vanguard Group Inc. in Valley Forge, Pennsylvania. "The key issue is the market's response to increased focus by the Fed on the inflation picture.''

Ten-year note yields increased 14 basis points to 4.21 percent at 2:42 p.m. in New York, according to bond broker BGCantor Market Data. They touched 4.22 percent, the highest since Dec. 27. The 3.875 percent security due May 2018 declined 1 3/32, or $9.38 per $1,000 face amount, to 97 9/32. A basis point is 0.01 percentage point."


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