Treasuries have been volatile the past week; the 10 year T dropped to a daily close of 2.44% last week on the report of a 0.1% contraction in the US GDP for Q1. This was attributed to weather related factors; with Q2 expected to be much better. However, the anomaly of a rallying stock market and bond market leaves some investors scratching their heads. Several factors are at play: (1) Short covering as traders bet wrong on rising rates; (2) Worldwide yield drops (Europe, Germany, Japan, England) based on their central banks and weaker than expected reports; (3) China buying treasuries to weaken their currency against the dollar; (4) Stock market rallies have bolstered pension fund balance sheets and reserves, they then buy bonds to balance out. Credit spreads continue to tighten, keeping all in loan rates in the low to mid 4’s. …stay tuned… David R. Pascale, Jr.
