The Treasury market saw mixed economic data and remained in a narrow range on Monday. Personal income rose more than expected but spending was in check. Other data like Chicago PMI and pending home sales were also mixed. Investors awaited testimony from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner later in the day. Treasury yields drifted slightly lower in early trading on Tuesday ahead of key economic reports.

1. Tuesday, March 01, 2011
The Treasury market remained stuck in a
narrow trading range on Monday as the
economic news was offsetting in scope.
Personal Income rose greater than the
forecasts (1.0% vs 0.4%) but Personal
Spending remained in check with a headline
release of 0.2% versus the Bloomberg
consensus of 0.4%. On the plus side for the
economy, the Chicago Purchasing Manger’s
index rose from 68.8 to 71.2 with the forecast
calling for a print of 67.5 while the NAPM-
Milwaukee rose six points to 63.00. Pending
Home Sales countered with a decline of 2.8%
as compared to the survey of -2.3% and a
revision of last month’s report that went from
2.0% to -3.2%. Adding to the pressure on
bonds was the second consecutive day of
Source: Bloomberg L.P. Chart by the Fixed Income Strategies Group RBC Wealth Management
equities showing a sizeable gain with the Dow
Jones closing at 12226.34 on a 95 point rise.
At the close the two year note rose 2/32 for a DMV Matrix 3/1 Previous Change
0.68% yield and the five year note improved by
10-yr Treasury 3.462% 3.427% 0.035%
3/32 to a 2.135% yield. The ten year note
S&P 500 1,328 1,326 0.13%
finished up 1/32 for a 3.415% yield while the
benchmark thirty year bond was unchanged at Oil 97.88 96.97 0.94%
a 4.495% yield. The lackluster activity kept the Gold 1420.20 1,409.90 0.73%
thirty year bond locked in a range of down U.S. Dollar / Yen 82.07 81.78 0.35%
one-quarter of a point to up one-quarter of a Euro / U.S. Dollar 1.381 1.381 0.06%
point throughout the day.
The Federal Reserve Bank purchased $6.69
billion of Treasury securities as part of their
$600 billion QE2 program yesterday. Investors TODAY’S ECONOMIC RELEASES
submitted a total of $38.868 billion in the 2013-
2015 maturity range. Today’s purchase will be Time CST Release Period Survey*
for issues maturing in the 2028-2041 range. To
9:00 AM Construction Spending MoM JAN -0.4%
date, the Fed has completed sixty-five open
9:00 AM ISM Manufacturing FEB 61.0
market operations under the new program for
9:00 AM ISM Prices Paid FEB 83.0
a total of $380.202 billion.
1:00 PM Fed’s Beige Book
4:00 PM Domestic Vehicle Sales FEB 9.61M
Tuesday morning’s 9:00 a.m. CST headline for
4:00 PM Total Vehicle Sales FEB 12.60M
the ISM Manufacturing Index is expected to
show an increase of only 0.2 to 61.0 while the
Prices Paid component is forecasted to climb
higher by one and one-half points to 83.0. The
UPCOMING IN TODAY’S FINEWS
index has remained above the critical 50 level
since hitting a 51.4 in August of 2009 and
Strategies Group: Economic Commentary
reached a high of 60.8 last month. Over the
last six years, the index recorded a low point of
33.3 in December of 2008. A reading above 50

2. is indicative of an expanding economy. Also
Construction Spending is forecasted to
decline 0.4% following the 2.5% drop last
month. Lastly, at 1:00 p.m. CST, the Fed will
release its Beige Book report which depicts
the current economic activity from each
Federal Reserve district. The report is
published eight times a year approximately two
weeks before the next FOMC meeting which is
scheduled to take place on March 15th.
The Treasury market is drifting lower in early
morning activity as equity markets are still
registering gains in Asia and Europe. In
addition, the S&P 500 Futures index is higher
by nearly three points. Forecasts for slightly
higher readings on the economic data this
morning is keeping prices depressed. After the
economic events are released, attention will
then focus on Federal Reserve Bank
Chairman Ben S. Bernanke’s comments later
this morning. Mr. Bernanke begins his two day
testimony on Capitol Hill beginning at 9:00
a.m. CST. He will give the Fed’s semi-annual
report on monetary policy to the Senate
Banking Committee. Also speaking at the
same time is U.S. Treasury Secretary Timothy
Geithner who testifies on mortgages before the
House Financial Services Committee.
The two year note is down 1/32 at a 0.695%
yield and the five year note has declined by
6/32 pushing the yield up to the 2.18% level.
The ten year note has fallen 8/32 for a 3.46%
yield while the benchmark thirty year bond has
dropped by 9/32 to yield a 4.515%.
Fixed Income Strategies Group:
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