Fixed Income Recap:

Overall high yield was down about 1/2 yesterday.  This morning was weaker by about 1/4 with lots of data out this morning.  8:30AM is durable goods data and 10am is home sales data.

Fixed Income Most Recent Axes:

RCN Cable, Firstlight Power, Brand Energy, Coleto Creek, Swift Transportation, Celanese

KIK, Sbarro, IAP Worldwide, CCS Medical, BMS, ASR, Riviera, CEDAR FAIR

Treasury Rates Commentary

• A firm bid overnight in the UST market continued as the New York session opened with eyes on equities as they continued their retreat and the existing home sales data. Existing home sales printed a dismal 3.83M, a 27.2% MoM decline which as expected sent Treasuries to the races led by the 7-10 year sector. Recent/record highs were made across the curve shortly thereafter with the 2 year touching its record yield-.454%, 5 year 1.305%, 10 year 2.467% and 30 year 3.542%. The market, however, retreated rather quickly t settling down as the 2 year auction approached. For the fourth straight month the 2 year came at a record low yield and record low 3/8 coupon with the issue coming at .498% through by .2bps. Bidder participation was weak with only 29.2% allotted to indirects (lowest since April 2009) and 12.1% to directs (lowest since February 2010). 
• Post auction the large takedown by the street did not force any redistribution as the UST market once again found a bid with the downtick in the equity market and short covering. At 3PM Treasuries were higher in price across the curve with benchmark yields ~1-11bps lower, 7s out to 30s were the best performing, 2s the worst, not surprising considering yields in the sector are ~.50%. TIPS continued to underperform on the up trade and inflation expectations with breakevens in 2-7bps, 10 year breakevens are now 152bps.
• The Fed conducted their third purchase today in the 2013-2014 sector buying 1.35Bln of the 17.285Bln offered. Their purchases were all original maturity 3 year notes with 1/3 in the current 3 year issue.
• Eyes will once again turn to the equity markets overnight along with the yen which traded below the 84 handle intraday. Data tomorrow includes durable goods and new home sales. $36Bln 5 year notes will be auctioned tomorrow in what is setting up to be an extremely tricky auction.