Since 1pm, the 10yr TSY yield has fallen appreciably to test Friday's intraday lows at 3.59 and the yield curve is 9 bps flatter as measured by 2s vs. 10s. Though the drop in benchmark yields coincides with the completion of the 3 month bill auction, it's unlikely that the movement can be chalked up to this in any meaningful proportion. Another candidate would be the 3rd consecutive "lower high" being seen in the S&P. Additionally, that high at 947 is yet another failed attempt for the index to crack 950 today after opening slightly over 948. Adding to that momentum at the moment is the preparation and subsequent reaction to Obama's remarks on healthcare in that he specifically addressed that goals can be accomplished without raising the deficit. Adding further to that is the possibility of straight up speculative bargain buying. In the midst of all this as well, the Fed's Lockhart is out with what is being seen as slightly more bearish than expected verbiage. The end result can be seen on the charts.
The 10yr is likely to bounce and retest 3.59. The S&P would need to break 944 before further downside potential becomes likely. And perhaps the most important caveat of all is today's low volume, so all this may mean absolutely nothing! But for now, reprices for the better are a possibility.
2s vs. 5s: 146bps
2s vs. 10s: 261bps
5s vs. 10s: 114bps
NYMEX Crude: 63.33
US Dollar Index: 78.96
VIX: 24.72
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