Japanese and European bond markets swooned overnight for a reason all too familiar here in the U.S. (the economy is getting better), and Treasuries were tarred and feathered before things got going on this continent. With investors waiting for a wave of corporate supply, most ominously, a rumored $6 billion to $7.5 billion sale from
, bonds stayed lower until technically driven action pared losses in the cash market at the end of the day.
"As we opened up this morning, prices were already falling and were struggling technically as well," said John Canavan, Treasury analyst at
Stone & McCarthy Research Associates
in Princeton, N.J. "In the exceedingly thin trading, it didn't take much to push the market down until Thursday's low held."
Of late, the 30-year Treasury bond had lost 18/32 to 89 6/32. The yield rose 3 basis points to 6.04%. Today's low on the benchmark bond was 88 22/32, near the 88 20/32 low reached
Thursday that Canavan identified as a technical support level.
volume was down 33% when compared to the average Tuesday last month, and with so many people seemingly out of the office, it's ironic that Ford is planning on selling its deal now. The company was forced to
pull a planned $3 billion issue from the market two weeks ago due to thin conditions, just before the
raised interest rates, when the market sold off rapidly. Admittedly, conditions have improved somewhat. Investors are more likely to buy a corporate bond, a riskier investment than government securities, without quarter-end performance measures to think about. And part of today's meager volume is due to investors waiting out the week until they can get their hands on Ford's massive offering, to be split in three parts.
Ford will sell $1.5 billion in 32-year bonds (yes, 32), while Ford arm
Ford Motor Credit
issues $3 billion to $4 billion in five-year notes and $1.5 billion to $2 billion in three-year floating-rate notes. The global deal is the first of several offerings the company has planned for this year -- the company filed for registration of $10 billion of securities with the
Securities and Exchange Commission
earlier this year. This issue is expected to price Friday or Monday.
"There's little to nothing on this week's
economic calendar, which means corporate supply will become even more important," Canavan said. Federal agency
is scheduled to sell $3 billion of five-year notes this week.
Anything for the market to ignore foreign bonds. The yield on the benchmark 10-year Japanese government bond, or JGB, rose 0.085% to 1.695% overnight following the Monday release of the
report, a quarterly survey of business sentiment. The sentiment index rose to minus 37 for the April-June quarter from minus 47 the quarter previous. That, coupled with January-March's 1.9%
gain, the first positive reading in six quarters, provides a bit more evidence that Japan's economy is recovering, and bonds sold off.
European markets continued the game of one-upmanship. Reports that Germany's
fell below 10% for the first time in three years caused an 11-basis-point selloff in the 10-year Bund, which closed at 1.68%, according to
. The 10-year Gilt rose 7 basis points to close at 5.2%.
"Germany is auctioning 10-year Bunds tomorrow, and Spain is auctioning 10-years bonds as well," said one trader. "So there's a lot of supply in the European bond market coming."