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BOND MARKET RECAP

by Rom Badilla, CFA – Bond Trader and BondSquawker

Today’s economic data releases suggest that the U.S. economy is improving as home sales and good orders surge. New Home Sales in March increased by 411,000 which were above surveys by economists of 325,000. The 26.9 percent increase comes after four straight months of decline as home-buyers took advantage of government incentive programs. The U.S. Census Bureau released that Durables Good Orders excluding Transportation increased 2.8 percent in March, above economists’ surveys of 0.7 percent. In addition, Orders in the previous month were revised upward by 0.8 percent to an increase of 1.7.

With indicators suggesting stronger economic growth, U.S. Treasuries declined across the curve. The belly of the curve underperformed the most as the yield on the 5-year increased 5 basis points to close at 2.59 percent. The wings widened by 4 basis points as the yield on the 2 and 10-year finished the session at 1.07 and 3.81 percent, respectively. The yield on the Long Bond inched 4.66 percent, an increase of 2 basis points.

10-Year Treasury Yields – Intraday Chart

Stocks continue to rally and reached one-year highs today. The S&P500 gained 0.7 percent to close the week at 1217.28. The Volatility Index aka VIX increased to 16.62, 0.9 percent gain.

Greece called for activation of a financial lifeline of as much as 45 billion euros ($60 billion) as the country needs to finance 8.5 billion euros of bonds maturing in May. The Greek request needs approval from all 15 other euro- area countries including Germany, where surveys have shown public opposition to aiding Greece.

5-Year Credit Default Swaps on Greece closed at 615 basis points, a decline of 23 basis points. Despite today’s tightening, the spread has widened out by 175 basis points from a week ago as the country edges closer to default and as Moody’s Investors Service downgraded the debt to A3, a drop of one notch on Thursday.

Portugal CDS increased 4 basis points to 280 basis points. Spain followed suit and closed the week at 176 basis points.

The Euro ended a six-day skid by increasing 0.7 percent against the dollar and ended at 1.3384.

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