Thursday, February 07, 2008

Quarterly Bond Auction is Held Without Many Buyers

Top Line: The stock market managed to give a win to the bulls on Thursday. CSCO had opened down about 7% but that was near the low of the day. From there it was mostly up giving a lift to the overall market. We think this day was mostly for marking time. The market needs to go up every once in a while. We think the trend is down and that the 12,750 area would be very difficult to get through if the Dow could manage anything strong enough to get there.

The news of the day is that Romney called it quits in the election--not much to do with the stock market but it was kind of a shock that he dropped out.

Back to the market...Before the market opened, Wal-Mart disappointed the market with its January sales which were up but not by much. This along with the CSCO news was enough to push the market down in the very early going. It didn't take too long before buyers arrived. There was a lot of volatility with the market moving violently in both directions even though at the end of the day there was no real sign of it. The Dow was up 46 points on the day after getting pounded all week.

Today saw the Congressional passage of the economic stimulus package. The media is reporting a very underwhelming expectation by economists. Which brings us to bonds...

The Treasury Department held its quarterly auction of 30 year T-Bonds on Thursday and the report is that no one showed up. Well, that's not exactly true, they showed up but the were requiring higher yields to go out 30 years. The so called bid to cover ratio was a scant 1.82 which means there were $1.82 bids for every $1 of bonds sold. This may sound ok but it is very low. The US is trying to sell its debt to outside buyers to finance all of the spending. If foreigners decide not be oblige, there could be a little back up in rates. The bonds moved up about 14-20 bps in yield, today.

Lots of little news items about the consumer. The main idea is that the consumer is going into hibernation. The WSJ has a front page article scheduled for Friday which describes the plight of the credit card holders or users. Solid article.

FSI: 75.94 (just a little higher)

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