Wednesday October 14, 9:28 pm Eastern Time
Note: this article has a followup with more information.
U.S. CREDIT OUTLOOK-Thursday session may be calmer
By Scott Gerlach
NEW YORK, Oct 15 (Reuters) - Barring further hedge fund bombshells or other major surprises, the U.S. credit market's wild ride should pause on Thursday after several volatile sessions in a row, analysts projected.
''As long as there's no bomb ticking overseas, I think we could see a bit more stability,'' said Adam Blankman, a Treasury market analyst at Standard & Poor's MMS.
Given its dramatic rally on Wednesday, the long bond seemed primed for at least light profit-taking, Blankman said.
But, he said, shorter issues could draw buyers, particularly if equities markets perform weakly overnight.
''The long end has gotten slightly oversold'' in recent sessions, he said. ''The short end is going to continue to be pretty attractive.''
Traders attributed much of Wednesday's strong long-end rally to growing hope among bond bulls that the bulk of the hedge fund liquidations had passed. That view ignited a 1-1/2 point gain in the bond's price and assisted with the 10-year note's full-point rally, they said.
A lull in hedge fund-related activity would go a long way toward restoring calm in the market, but might leave participants pining for more excitement amid Thursday's rather dull economic events schedule.
Thursday features several pieces of economic data that in times past would have drawn fixed income investors' full attention. But with the market so convinced economic growth will slow, reports on business inventories, producer prices and the manufacturing sector might produce a yawn.
Peter Kretzmer, senior economist at NationsBanc Montgomery Securities LLC, begged to differ.
''The Philly Fed survey, I think, will be interesting,'' Kretzer said, referring to the Federal Reserve Bank of Philadelphia's October business outlook index.
U.S. manufacturers felt the pinch of the global financial crisis before firms in other sectors. While contraction in the factory sector is old news, data on the depth of manufacturing's problems remains important, Kretzmer said.
Economists polled by Reuters forecast, on average, a reading of -5.5 on the Philly Fed index, up just slightly from -13.2 in September.
(Note: this article is ''in progress''; there will likely be an update soon.) |
