US 10 year note yields have bounced to the 2.75% level from near 2.50% late last week. Prospects for a very large stimulus package from the incoming Obama administration are helping boost yields on prospects for an aver-larger supply of Treasury securities. More importantly in the near-term. risk aversion has receded somewhat as US equities staged a healthy rally late Friday and the global markets picked up the baton. The ball continues to roll this morning with Dow futures up nearly 240 points.
One point to consider on the matter of Treasury supply. Amid the credit crisis, the Treasury is the only game in town in terms of new issues. The markets are all but frozen for anything but sovereign borrowers and those guaranteed by the government like the big banks. There is virtually no new paper on the Street, giving the Treasury the ability to borrow nearly at will at very, very low rates. That probably won’t change much over the next few months and is a supportive factor for the dollar.