Treasuries: Treasury notes dropped lower on Thursday as traders weighed the supply and demand issues of another $14b auction that had the Fed buying again, after a weekly total of $71b new notes came to market this week from the Treasury department. The 10 year note value has created the biggest decline in two years of trade by reducing in value for six consecutive weeks. Thirty-year bonds have lost investors over 20% so far this year.
The Treasury created another mass of dollar backed notes for the market and the Fed, to absorb at auction this week, and the move from the Fed to purchase the largest amount up-front that it has done since March 17th set the tone for others to follow. Unfortunately that was not a success in instigating interest and buyers rejected the call today. That sent the 10 year yield up to touch 3.31%, the highest this year, and the biggest one day move, 12 basis points since the 15 basis point move on March 15th.
The Fed continues its short-dollar mandate by buying notes at the fastest rate of knots since the announcement of the $300b six month purchasing spree, with over $100b having already been bought and put into the Fed reserves. The Fed is working hard to support the market, but now needs to take care that interest rates on these notes do not get too far above what is perceived to be the 3.2% target rate.
Crude oil: June delivery values popped higher to $56.39 (+0.1%) a five week high, on better than expected U.S. housing data, after holding major support at $48.50 last week. Oil closed higher by 2.65% on the day, a $1.41 gain.
Gold Bullion: Gold for June delivery closed higher by $4.50(+0.1%) to close at $915 per ounce. Traders tested and broke a major resistance area at $910 in the process, at the 100 and 50 day SMA area. Bullion held in the SPDR Gold ETF remained unchanged at a record 1,100+ metric tons.