Flight to quality was the theme of Tuesday, as investment downgrades of Greece and Portugal caused investors to dump those bonds in favor of U.S. treasuries. The rally in the U.S. bond market peaked mid-day Tuesday, with treasury and mortgage bond prices ending the day well of the highs. The decline in bond prices is continuing this morning which will translate into worse pricing---.375% to .50% worse than Tuesday’s mid-day improvement.
Two important items remaining on today’s calendar---the U.S. Treasury auctions $42 billion of 5 year notes, and the end of the Fed’s two day meeting, with the policy announcement scheduled for approximately 11:15 AM, PT.
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