Treasury yields have moved to their lowest since May, reflecting a number of influences, listed below. I recognize that prices spiked, but the catalyst is more the result of collective influences than anything else, although there were a few influences that coincided at the time of the spike:
1) In the futures market, there was a spate of so-called black box trading, as evidenced in part by a large amount of volume that took place at around the opening of pit trading, some of it possibly tied to the 10-year moving through 3.80%, its first break through that yield since May.
2) The sense out of Jackson Hole was that Fed Chairman Ben Bernanke was quite dovish, and it is possible that participants had their buying shoes on this morning following the weekend meeting.
3) The Chicago National Activity index was released earlier today and the results suggested that the U.S. economy is bordering on recession.
The index is strongly correlated with major economic statistics.
4) The Lehman Fixed-Income Indexes, which serve as benchmarks for portfolio managers, is set to increase sharply at month's end as a result of newly sold long-term Treasury issues. Managers will need to add "duration," by putting cash to work and or extending maturities or buying futures. It is a bit early for this influence, but some managers might feel comfortable adding duration now and speculation over its influence is an influence in and of itself.
5) A story supposedly appearing on the FT's online site is said to indicate that a Korean regulator is warning against any purchase of a U.S. investment bank.
6) Market News reports that Reuters is citing a G-20 official that is saying the IMF is reducing its growth forecasts for 2008 and 2009.
7) Equities are opening weaker.
8) There is no shortage of anxiety over Fannie and Freddie and its implications for the economy and the financial markets.
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Tony Crescenzi is the Chief Bond Market Strategist at Miller Tabak + Co., LLC where he advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the author of the forthcoming book, "Investing from the Top Down," "The Strategic Bond Investor," and co-author of the 1200-page book "The Money Market."Crescenzi is a contributor to RealMoney.com."