Fixed Income Recap:

High yield had a relatively positive finish yesterday as the index fought back from down 5/8 earlier in the day to about unched going out.   The whisper for home sales was slightly worse than -12.4% so though terrible in actuality, not worse than the early whisper expectation.   New home sales under 300k is not a sustainable rate. From 1963 to present we are at the lows with near lows in 1981 and highs of course in the 05 boom near 1.4mm units per year. 

Fixed Income Most Recent Axes:

HEIGR 6.125 16, THC 8%, WCC 7.5, DHI 2011, LEN, VWRINT, HAWKER, Capell, IRM, MTH, OC, PZZ

Herbst, MGM Studios, Great Canadian, Marsico

Treasury Rates Commentary

• A quiet range bound Treasury market overnight gained momentum as the New York session opened on weak global equities, gilts (10 year reaching an all time low yield) and the Ireland downgrade. The vicious bid continued throughout the early and mid morning hours as the slew of poor economic data continues to stream down, today durable goods only up .3%, expected 3.0% and new home sales at their lowest level since at least 1963 coming in at 276K expected 330K,down 12.4% MoM. The intermediate and long end on this news once again traded to new low yields, the 5 year 1.278%, 7 year 1.863%, 10 year 2.418% and 30 year 3.462%. After extremely large volume traded near the highs mainly concentrated in the intermediate sector, the Treasury market retreated off these levels throughout the morning aided by equities coming off their lows, profit taking and attempted setups ahead of today's 5 year auction.
• The 5 year went into the auction near today's lows and ultimately came with a small .7bp tail at 1.374%, a strong 50.8% to indirect bidders (highest since January), 8.7% directs and a 2.83 bid to cover. A new record low yield for a 5Y auction surpassing December 2008 which came at 1.539%. Treasuries settled down post auction continuing the grind lower throughout the remainder of the session. At 3PM benchmarks were lower in price across the curve with yields higher by ~.7-5.0bps, the belly underperformed the wings.
• Tomorrow brings the weekly claims data which will be closely eyed after last weeks 500K print on initial claims. Shortly thereafter the Fed will conduct its fourth purchase concentrating in the 2021-2040 maturities which will be followed at 1PM with $29Bln 7 year notes.