Bond Market *Still* Anxious

Bonds rise as disappointing data revive worries (via Reuters):

U.S. government debt prices climbed on Thursday as weaker-than-expected economic data revived investor worries and spurred safe-haven demand for bonds after the Federal Reserve said the economy was leveling out.

Thursday's data on retail sales, jobless claims and business inventories rekindled fears about the vigor of an economic recovery. They sparked selling in stocks and risky assets and buying in safer investments, including Treasuries, analysts said.

The data preceded the Treasury Department's $15 billion auction of 30-year bonds set for later on Thursday, the last leg of a record quarterly refunding.

"We have seen a nice little pop in Treasuries, with (the economic) numbers coming in visibly softer than what was forecast," said Kevin Flanagan, fixed income strategist for global wealth management at Morgan Stanley in New York.

The government reported U.S. retail sales unexpectedly fell 0.1 percent in July despite hopes of a boost from the federal "Cash-for-Clunkers" program and a larger-than-expected number of workers filed for initial unemployment benefits last week.

The yield on the 10-year Treasury notes sold on Wednesday was at 3.67 percent, down from 3.77 percent shortly before the release of the retail and jobless claims data.

The new "on-the-run" 10-year issue cleared at a high yield of 3.73 percent at Wednesday's $23 billion auction.

The price on 30-year Treasuries last traded up 22/32 after rising more than 1 point when Wall Street briefly turned negative.

The 30-year bond yield, which moves inversely to price, was 4.50 percent, down from 4.53 percent late on Wednesday.

The "when-issued" market showed traders had expected the new 30-year bond to yield 4.505 percent.

Analysts predict stronger demand at the 30-year bond auction than at Wednesday's 10-year note sale, blaming the 10-year's weakness on uncertainty about the Fed's Treasury purchase program.

Funny that Reuters loves burying stories like this in the deepest depths of its page as if somehow it would prefer this go unseen.

Now, who in the hell are these analysts predicting a strong demand for 30 years? Do they themselves hold 30 years? Does Tim Geithner? How about Bernanke?

That's what I would like to see. Go on, Geithy, I think that would be the strongest sign you can send to China that the dollar is strong. You should just liquidate now and put it all in 30y T-bills if you want to show them just how safe their investments are.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.