Treasurys Update

The Fed is buying Treasurys every day this week.  It says it will also use cash from expiring mortgages to buy more Treasurys increasing total purchases from $600b to $900b.

From WSJ (“Bond Market Defies Fed”):

TUES: Fed buying 2- to 3-year notes

WED: Fed buying 8- to 10-year notes

There may  be a lag in price effect from the announcement date to the Fed purchasing date.  Watch the effect of Fed buying 2- to 3-year notes today and see if the price action is is repeated tomorrow in the 8- to 10-year notes; we are looking for a leading indicator for the 10-years.  Bond shorts should be weary of this decline being a pullback, then rally, and then a further pullback.  Always watch for the shake-and-bake and choose your exit in advance.

So far yields on 2-, 3-, 10-, and 30-year notes are down from yesterday but still up from last weeks levels (via yahoo bonds center).

Lots of action on the floor of the CME pit today. Pit population was gauged at 66% after 12pm EST. Heavy selling in the e-mini, 10-years selling off, dollar up.

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