Long Treasuries Take Worst Hit in 05 : $8B TIPS at 1.51 B/C
Treasuries took a beat-down, with the 10-yrs running back to the lows of late last week, led by the drop-off in the 30-yrs. Once again curve action dominated play as the spreads between maturities widened and narrowed rather dramatically. The treasury sell off began following the better than expected read on consumer confidence and pushed to session lows in the afternoon following a disappointing $8B 20-yr TIPS auction. The market may have retraced losses if the auction experienced strong demand, but the weak 1.51 cover and low indirect bidder participation provided the market with additional selling power. The final major auction of the week will be the Wed $24B 2-yr auction. The lack of economic data and Fed speak tomorrow will put the 2-yr auction at center stage with the market looking closely at indirect bidder participation. The dollar used the better than expected consumer confidence figure to extend overnight gains. The dollar rally against the yen began overnight after the an official from the Chinese Central Bank monetary policy committee, said it was not time to alter the yaun's peg to the dollar. The remarks induced comments that Japan will not let the yen rally beyond the 5-yr high reached Jan 17, despite speculation the G7 will call for stronger Asian currencies. Without the expectation of China allowing for the possibility of yaun appreciation, it will be difficult for other Asian currencies to appreciate. There are a lot of players caught short the dollar against the euro from way back and the squeeze was put on again today, with 1.2920 being an important spot. Should it be breached, it will "cut through, like butter to 1.2850," noted one major player, "when it broke through 1.2850 (above) back in early Nov, that level became a line in the sand," and it has taken a couple of runs back at it but never penetrated. The 10-yrs are currently -16/32nds yielding 4.185%
Market Data 
Markets 
AI
