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  • U.S. Treasury Bond Prices

    Warren Sulmasy’s Market Comment for Monday, January 29:

    U.S. Treasury Market:
    ● 5 year yield .895
    ● 10 year yield 1.99
    ● 30 year yield 3.18

    The U.S. Treasury bond prices were lower again today. The Federal reserve will speak tomorrow. There is speculation that the Federal reserve will slow down some of the stimulus measures instituted over the last couple of years such as QE (quantitative easing) and operation twist (FED buys government and mortgage debt). As a result of this speculation, todays $35 U.S. 5 year Treasury note auction yield was the highest since March 2012. It is worth noting that the 10 year Treasury bond yield was just shy of yesterdays 2 percent yield. That was the 10 years Treasuries highest yield since April 18, 2012.
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  • Will the Fed Make Policy Changes?

    Warren Sulmasy’s Market Comment for Monday, January 28:

    Most IBs are continuing to aggressively pre-fund 2013-2014+ debt needs as there is concern that the credit cycle will derail once the Fed indicates an intention to modify its policies. In the 1993-1994 credit cycle, a similar credit dynamic existed in late ’93 thru January ’94. At that time, the Fed raised the Discount Rate in mid-February, resulting in the collapse of the Mexican Peso, repatriation of liquidity previously invested in the local Peso-denominated Tesebono securities and the U.S. Treasury liquidity extension to The Mexican Central Bank. EM spreads gapped-out hundreds of bps., equity markets imploded and the U.S. credit markets deteriorated. At that time, the Fed believed that they had properly and effectively communicated this policy change sufficiently in advance so as to avoid the credit market collapse that followed. At present, the Bernanke Fed will “not” surprise anyone.
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