This week, the U.S. Treasury will sell billions in debt. It will be interesting to see if there is still strong interest, or whether the shenanigans of Fannie Mae and Freddie Mac will taint our national power to raise credit.
Here's the Bloomberg story:
Aug. 25 (Bloomberg) -- Treasuries rose the most in almost two weeks on speculation credit-market turmoil may be widening.
The gains pushed yields on U.S. 10-year notes to the lowest since May 13 as financial stocks fell amid speculation American International Group Inc. will post a loss and Korea Development Bank may be reconsidering a possible bid for Lehman Brothers Holdings Inc. Interest-rate derivatives imply banks are becoming more hesitant to lend.
``This is the longest-running horror movie that any of us has ever had to deal with,'' said T.J. Marta, a fixed-income strategist at RBC Capital Markets in New York, the investment- banking arm of Canada's biggest lender.
The 10-year note yield declined 9 basis points, or 0.09 percentage point, the most since Aug. 12, to 3.78 percent at 4:39 p.m. in New York, according to BGCantor Market Data. The yield touched 3.76 percent. The 4 percent security due in August 2018 rose 3/4, or $7.50 per $1,000 face amount, to 101 26/32.
Two-year yields dropped 9 basis points, also the most since Aug. 12, to 2.33 percent.
The rally comes as the Treasury prepares to auction $32 billion of two-year notes on Aug. 27 and $22 billion of five- year securities Aug. 28. The size of the two-year note sale is a record, and the five-year note auction will be the biggest sale of that maturity since February 2003. Both amounts are $1 billion more than expected last week.
``Even with supply on the horizon, everyone is concerned with the uncertainties,'' said Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania. ``You have the thought of continued credit deterioration within the market. That is an ongoing thorn in everyone's side.''
The cost of protecting U.S. corporate bonds from default rose as Credit Suisse Group said AIG may lose $2.41 billion this quarter and as the ninth U.S. bank failure of the year, the collapse of Columbian Bank and Trust Co. of Topeka, Kansas, added fuel to concern subprime losses will worsen.