Joined Nov 11, 2007
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Treasuries: Risk trade is back on (Satire)

Oh wait a minute…

Thursday is off to a sunny start for investors who prefer riskier assets than bonds.

Germany approved the eurozone bailout, the U.S. economy performed stronger than previously thought in the second quarter, and fewer Americans filed for unemployment benefits last week — all good news that is fueling a move from safe havens like U.S. Treasuries into stocks instead.

As a result, the price on the 10-year Treasury fell Thursday, pushing the yield up to 2.01%. (Bond prices and yields move in opposite directions).

The 10-year yield is coming back from a record low at 1.67% set last week.

That said, some bond traders are skeptical the optimism will last.

“The risk-on trade could be getting ahead of itself,” said Michael Cheah, senior portfolio manager at AIG SunAmerica. “For unemployment claims to be at 391,000 and the stock market rejoices in this — I’m worried about the psychology there. People are grasping for any kind of hope they can get.”

The Treasury Department is scheduled to auction $29 billion in 7-year notes later in the day, following successful auctions of $35 billion in 2-year notes Tuesday, and $35 billion in 5-year notes Wednesday.

Maybe they should put out a piece titled “Treasuries: Risk trade is back off” now? Or maybe news stations should avoid creating posts that try and preclude market direction?

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