Thursday, September 14, 2006

Price action on the 10-year has been odd today. Before the 8:30 numbers, the 10-year was at 101-1, up 6 ticks or so. After the number, and I think the focus was on import prices primarily and less so retail sales, we dropped down to 100-25. At that point I thought there would be support, because there are enough people looking for an entry here that would stem the sell off. For about 2 hours, that looked right, as we were back above 100-30 by 11AM. Now its fading again, and we’re back around 100-25.

Corporate bonds have been weaker. Lehman’s Credit OAS doesn’t show it, but most of the names I follow are 2-5 weaker over the last 3-4 days. I don’t think this is anything more than the ebb and flow of markets. Higher rated corporate bonds have decent value here, because a resteepening of the yield curve will support spreads of these credits through any economic weakness, and you’ll just collect the carry.

Anyway, its a boring day waiting for CPI tomorrow. Every inflation figure really matters now, with the market assuming Fed cuts coming up, we need tame inflation to keep that trade alive.

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