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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (50660)	5/6/2006 9:24:06 AM
From: shades	Read Replies (1) \| Respond to of 116555

US Agencies: Risk Premiums Tighten As Treasurys Rise NEW YORK (Dow Jones)--Risk premiums on agency debt tightened amid a modest rally in Treasury prices Friday. A weaker-than-expected April jobs report boosted Treasury prices early in trading, tightening risk premiums on interest-rate swaps by 0.5 basis point. This tightened spreads on actively-traded agencies by the same amount. The Labor Department reported non-farm payrolls for April grew by 138,000 last month, less than the 205,000 expected. The news contrasted sharply with the past week's almost uniformly strong economic news, lending some support to the market's forecast that the economy will slow in the second half and that the Fed will eventually stop its two-year campaign of raising short-term interest rates. Late Friday, the Treasury's 10-year note was up 9/32 to yield 5.11%, below the session's high of 5.16% before payrolls. The 10-year swap spread narrowed to 52.25 from 52.50 basis points on the day. Aside from the impact from the jobs report, the U.S. agency debt market was quiet. Market participants focused on the Treasury's refunding next week, said Jim Vogel, executive vice president at FTN Financial Capital Markets. The Treasury will sell $34 billion of new securities next week: $21 billion of three-year notes on Tuesday and $13 billion of 10-year notes on Thursday. Vogel expects Treasury investors to roll over less maturing three-year paper than the market expects, which could lead to tighter agency spreads if investors end up parking more of their cash in agencies. The market is also looking forward to the Federal Open Market Committee's Wednesday meeting, where it will most likely raise the Fed's overnight-lending rate from 4.75% to 5.00%.