DJ Treasurys Jump -2: Buying Seen Driven By Fannie, Iraq
Those technical factors, along with the fundamentals of the U.S. economy, are all giving investors plenty of reason to stick with long positions in Treasurys.
"The street is cautiously trading the Treasury market from the long side," said David Winter, government trader at Zions First National Bank Capital Markets in Jersey City, N.J. "All roads point to lower yields, with real money buying the belly in search of yield and portfolios needing duration," he added.
At the same time, pressure on the debt of U.S. government-sponsored enterprises was also helping Treasurys. For about a week, Treasurys have benefitted from trader speculation that the GSE giant Fannie Mae (FNM) will need to buy Treasurys to narrow its so-called duration gap. That gap - which measures the difference between the interest rate-sensitivity of Fannie Mae's assets versus its liabilities - ballooned out to negative 14 months as of the end of August, leaving the firm's balance sheet more vulnerable to risks associated with falling interest rates.
"It's a very emotional time, and buying is being driven by concerns regarding Fannie and Iraq," said David Ging, fixed-income strategist at Credit Suisse First Boston in New York.
Economic data released Monday also painted a picture of an economy that may be starting to stall. The Conference Board's index of leading indicators for August declined 0.2%. The index was expected to show a fall of 0.1% from the previous month's revised decline of 0.1%. It was the third consecutive month of declines for the index and was also the first time in 15 months that the six-month growth rate implied by the index was negative.
COUPON ISSUE PRICE CHANGE YIELD
2 1/4% 2-year 100 13/32 Up 1/32 1.91%
3 1/4% 5-year 102 6/32 Up 9/32 2.77%
4 3/8% 10-year 105 16/32 Up 22/32 3.71%
5 3/8% 30-year 110 25/32 Up 1 4.68%
2-10-yr yield spread: 180 BPS vs. 186 BPS
Source: BrokerTec Global
-By Steven Vames, Dow Jones Newswires; 201-938-2206; steven.vames@dowjones.com
(Michael Mackenzie contributed to this report.)
(END) DOW JONES NEWS 09-23-02 |
