The U.S. Treasury’s announcement of the details of next week’s debt auctions brought on a swift reaction in the bond market Thursday afternoon. The auction schedule is comprised of $11 billion of 5 yr TIPS, $44 billion of 2 yr notes, $42 billion of 5 year notes, and $32 billion of 7 year notes, to run on consecutive days beginning Monday, April 26, 2010. The result of the announcement was an immediate decline in treasury and mortgage bond prices, causing many lenders to worsen prices mid-day. The decline in prices continues this morning, with mortgage bonds worse by another .25%.
Next week the Federal Open Market Committee (FOMC) will meet for two days to discuss interest rate policy and economic activity. CNBC reported this morning there may be at least six FOMC members interested in selling assets as well as eliminating the “extended period” language, which references how long the Fed will keep interest rates---the Fed funds rate---at .25%.
Neither of the above topics bodes well for lower interest rates---next week could be quite volatile.
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