Several things going on in treasury land...Tuesday was another day of treasury buying their bonds back..this time on a month end extension day ( when portfolio managers have to make sure they match up to what the Barclays extensions tell them where they need to be) so a rally was in place. Typically when a month end extension is finished the market sells off. This started early Tuesday afternoon when the Fed was done buying and continued overnight when Germany sold a 5 yr BUND but had a bid ratio of 1.1 x ... not healthy especially since the Bundesbank was a big bidder. Still concern over European sovereign debt. Munis were ok yesterday but with this sell off in treasuries ( 10s from a 2.75 high on Tuesday to a 2.91 this morning and the 30 yr from a 4.07 to 4.19 this morning) munis are not attractive in ratio land-- 10 yrs 96% and30 yr 102%-- so adjustments will need to be made. Also BAB deals have started to widen out -- LADWAP from +235 to +250 and Chicago form+320 to +330 . This pattern will continue thru the end of year..
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