“Solid” Demand for 10 year Treasury Calms Markets

This week saw some heavy volatility in Treasury markets; the 10 year T hit a high of 2.37% on Tuesday before rebounding to 2.15% yesterday. The volatility stems from some breaks in key technical levels, lack of liquidity in the trading system (due to Dodd Frank regulations on Banks), large corporate issuance (many companies sell Treasuries when they issue new bonds as part of their overall hedging). Today’s $24 billion auction of new 10 year Treasuries was well subscribed, lots of foreign bank buyers, the yield went off at 2.24% with a close today of 2.29%. However, the volatility and major sell off in worldwide government debt has investors wondering if “the market may not wait for the Fed”, noting that the Fed has absolute control of floating rates with fixed rates set by the market, but often influenced by Fed’s statements. CMBS: AAA’s have been trading in a tight range over the past few months, now at SWAPs+87 bpts with new full leverage loans pricing at SWAPs+210, give or take based on product type and quality. All-In 10 year rates are in the 4.50%/4.60% range. …..stay tuned…. David R. Pascale, Jr.