Today's 5-year auction was better than expected and Thursday's 10yr auction should do well also thanks to scarce off the run supply in a 10-year duration. The economic calendar is free of market moving data Thursday, so the market will focus on a dearth of Fed speakers and the 10-year auction. The market should extend higher Thursday but follow-thru gains should be limited.
In terms of data, the inventory/sales plunged to a record low to 1.21, as companies continued to tighten their belts. The MBA mortgage index surged 18.6%, helped by fresh declines in mortgage rates. Consumer credit increased by $900 million. General Motors Acceptance Corp. ($1 billion 5-year notes) and General Electric Capital Corp. ($4 billion floating rate notes) priced deals that kept the 5-year sector busy, and may have helped swap spreads tighten further.
The December bond closed up 1-6/32 at 115-29, while the 2-year note and 30-year bond spread tightened 6 basis points to +326 basis points amid hopes of future Fed operations moving down the curve, which also helped the belly outperform. The dollar recovered somewhat against the euro, but slid further against the yen, raising the specter of BoJ intervention.