Markets fall on rising Treasury yields

After a strong start, markets sank & remained lower for the balance of the day. Dow fell 24, decliners over advancers by 20% & NAZ dropped 7. Banks were weak all day.


S&P 500 FINANCIALS INDEX

Value 164.92

Change -2.60

% Change -1.6%

The Alerian MLP Index slipped again, down 1. The chart shows it has been selling off after hitting 233. The REIT index was weak, down 3, over worries about rising vacancy rates on leases. However junk bond funds were mixed.

Alerian MLP Index --- 2 weeks





Oil went over 71. Below the daily price data is a chart for OIL, an ETN tracking oil on a consistent basis. It seems like nothing can stop the bulls.

CLN09.NYM

..Crude Oil Jul 09..

71.26

.. 1.25 ......(1.8%)

OIL --- YTD





Treasuries continued their decline, pushing 10-year yields to the highest since Oct, as the gov sold $19 billion of 10-year notes. The notes drew a yield of 3.99% at auction, the highest since last Aug. The yield on the 10-year note rose 8 basis points to 3.94% (reaching 3.99% earlier). The 30-year bond yield touched 4.83%, the highest in a year ($11B will be sold tomorrow). Today's auction was viewed as disappointing. The bid-to-cover ratio was 2.62X, above last month's number of 2.47X & it has averaged 2.40X in the last 10 sales. Indirect bidders, including foreign central banks, bought 34.2%, up from 31.9% in May. The average at the last 10 auctions was 25.8%.

•Treasuries Drop, Pushing 10-Year Yield to Highest Since October After Sale


The last few weeks have been a terrible time for Treasuries (i.e. yields have risen dramatically). Even more debt is coming to market.

10-Year Treasury Yld Index - 2 weeks





The federal budget deficit surged to $189B, a record for May, pushing the tide of red ink to almost $1T with 4 months left in the budget year. After just only 8 months, this qualifies as a record for a full year. The rising deficit reflects increased gov spending & $B spent on bailouts while tax revenues decline. The administration is projecting the deficit for the year will total an all-time record of $1.84T, more than 4 times the amount of last year's record deficit. Last month's imbalance compared with a $20B deficit in Apr, the first time that happened in 26 years (when the gov runs surpluses from tax payments). The administration estimates this year's deficit will be followed by a $1.26T deficit in 2010 & will never dip below $500B over the next decade. Deficits from 2010 to 2019 are expected to total a staggering $7.1T.

• Budget deficit hits record for May of $189.7B- AP

Dow has been flat lining for almost 2 weeks, just below the point that would take it into the black for 2009. S&P 500 & NAZ are already positive for the year, only Dow has failed.

Dow Jones Industrials -- 2 weeks