Daily Market Commentary
Commentary prepared by Balance Sheet Solutions, LLC, Member FINRA/SIPC
Wednesday, March 10, 2010 at 8:00 a.m. CST

Yesterday, Treasuries declined on concerns related to global stocks eroding demand at the government’s auction of $21 billion in 10-year notes. The 10-year note yield climbed two basis points to 3.72% this morning. The 10-year notes scheduled for sale today yielded 3.73% in pre-auction trading, compared with 3.692% at the previous offer of the securities on February 10. This week’s auctions started with a three-year sale yesterday, and will finish with a 30-year offering tomorrow. Investors bid for 2.67 times the amount being sold in last month’s 10-year note auction, versus an average of 2.77 times for the past 10 auctions. Indirect bidders, the group that includes foreign central banks, bought 33.2% of the securities, versus the 10-sale average of 40.3%. 

Interest-rate futures on the Chicago Board of Trade show a 41% chance U.S. policy makers will raise the benchmark target rate for overnight loans by at least 25 basis points by September. This is up from 30% a week ago. Fed Bank of Chicago President Charles Evans remarked yesterday that low interest rates are likely to be needed “for some time.” He said he expects the Fed to hold its target lending rate low for the next “three or four meetings” and reiterated his support for the central bank’s guidance that rates will stay low for an “extended period.”

Investors can expect some weakness in the Treasury markets today as the auctions proceed. A recent announcement by the Fed that they will continue to hold the nearly $1.25 trillion in MBS they have purchased, to use for future tightening actions, is offering some relief to investors concerned about the potential impact of the Fed returning the securities to the markets.

March 8 - 12, 2010: The Week Ahead
Sources: Bloomberg

**All quoted rates are indications and are subject to change without notice.

* Balance Sheet Solutions, LLC is a member of the FINRA/SIPC.