Market Commentary

In spite of the $74 billion in auctioned securities coming to the market this week, 10-year U.S. Treasuries rose for the first time in three days. The speculation is that yields are too high after climbing almost a percentage point in the past year. Market participants are now wondering if economic reports will point toward an economic recovery that is struggling to get on track. At the same time, China’s indication that it wishes to keep the Yuan at a “reasonable and balanced level” is seen as an indication that they will continue to buy Treasuries.   

The yields on Fannie Mae and Freddie Mac mortgage securities fell to the lowest level on record, relative to Treasuries. The difference between the 30-year MBS and the 10-year Treasury narrowed another two basis points to 63 basis points. The tightening of spreads continues to be fueled by the Fed’s purchase program.  Through March 3, the Fed had purchased $1.22 trillion of the targeted $1.25 trillion to be purchased by March 31, 2010.

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To our Customers and Clients:

It is amazing that it has been 10 years since we all worried about the potential catastrophic impact of Y2K. While we opened the last decade with little effect from an anticipated event that had everybody’s focus, we certainly closed it with an unexpected and devastating event.