To: John Pitera who wrote (6696 ) 8/6/2002 10:11:17 PM From: John Pitera Read Replies (1) | Respond to 15:06 ET 10-year: -39/32..4.363%....GNMAs: -16/32....$-¥: 120.90What a day ! While we heard that trading volumes were not magnificent and the curve was battered, there are all sorts of things to talk about, which is something that is welcomed by those in our line of work. First and foremost is the strength in stocks. We will not go into the validity of this bounce (though traders we spoke to didn't seem to buy it) though we will note that is was robust and broad based (though trading was thin). We heard overnight that there was a money manager who was buying stocks after taking profits on a large long euro fixed income position . This reportedly supported the DAX by no small margin, and served to prop up the dollar and domestic futures, along with thoughts to the potential for better earnings out of CSCO. On this flip side, this set the negative tone in Treasuries, which held through the close with the front end and 5s higher in yield by 20 bp, 10s by 16 bp and 30s by 10 bp.Bid to cover was 1.76, which is stronger than last quarter , when it came in at 1.72. Noncomps tell a different story, as there were only $349 mln versus $500 mln last quarter. However, when considering that it was the lowest coupon on record (read, we are some seriously lofty levels) we would opine that this thing went better than the numbers tell us. We could also see the street get banged up a bit on the re-auction, with 10-yr supply coming tomorrow. Lehman Brothers jumped on the ease bandwagon today too, as their call is for a 25 bp ease in September, November and December. join the ranks of GS, DB and SSB in having expectations for a proactive FOMC . Actually, there were some talking about this being supportive of post-auction long positions and being involved in new paper (one trader we spoke to said that he was short, but is going to pile on longs after the auctions). But on the flip side of this was an article out in the early afternoon from a prominent Fed watcher in which his view that the Fed does not have to accommodate the market's expectations (of an ease). While this fellow has no additional insight over what the market at large has, he usually has some immediate impact on the curve. In this respect, there was a bit of a fade to UST (by about 2/32 to 3/32).
