This morning the news is all about compromise as the President announced the framework for a compromise on tax rates and unemployment benefits. This bodes well for the economy and the markets are responding as such. Treasuries have given back their gains from yesterday, and then some with the 10-year note rocketing to 3.09%! Mortgage bonds are worse in price from .50% to 1.00% for lower note rates.
Later today the U.S. Treasury will begin the first leg of this week’s auctions with $32 billion of 3 year notes. Hopefully at these levels demand will be strong.
As part of QE2 the Fed will be buying $6 to $8 billion of Treasuries maturing between 12/2014 and 5/2016.
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