Long Bond Leads Weekly Losses
08-Jun-12 15:44 ET
EUR/USD: 1.2506Long Bond Underperforms
: Treasuries were hit hard this week as overbought conditions brought on heavy selling. A surprise rate cut by the People's Bank of China caused heavy selling in the middle of the week which continued on Friday as reports European leaders will meet to discuss a recapitalization of the Spanish banking system surfaced. Chairman Bernanke's testimony in front of the Joint Economic Committee on Thursday was a non-event as he suggested the Fed was prepared to act if needed, but that nothing has yet been decided upon. Heavy selling of the long bond dropped it more than five points off Friday's close as it finished lower every day this week. The sharp decline produced a rise of more than 20 bps in yield as it settled the week at 2.765%. Selling weighed on the 10-yr note as the benchmark yield jumped 14 bps this week to 1.637%. Shorter dated maturities fared far better as light selling caused yields at the front of the curve to perk up just a couple of bps. The yield curve swung steeper over the course of the week as the 2-10-yr spread widened to 136.5 bps.
Precious metals ended mixed as gold rallied $5 to $1593 and silver held steady near $28.50. There is no data on Monday.
SF's Williams will give opening remarks at the FRBSF's "Challenges in Global Finance: The Role of Asia" conference (12), ATL's Lockhart will speak in Chicago on the economy and monetary policy (12), Cleveland's Pianalto will talk in Cleveland on improving educational attainment (18), and Chicago's Evans will address attendees of the Loop Capital Markets 4th Annual Economic Update dinner (2015).