Treasuries Finish Sharply Lower

The latest home sales and consumer confidence data helped send prices tumbling

Treasuries finished lower in price, as the first concrete sign that the Fed's "soft patch" of June data was behind us lowered the boom on Treasuries, says Action Economics. July consumer confidence leapt over 4 points to 106.1. June new home sales fell 0.8% to a 1.326 million pace, but even this was comparatively stale data and defied expectations of a deeper correction.

Supply also crowded out the bulls and JPM Chase's investor sentiment survey showed a large increase in Treasury short positions. Hedge fund liquidation as well as fresh bearish option structures also weighed.

The technical deterioration became self-fulfilling as the 10-year note yield set a month-high mark of 4.60% -- over 10 basis points higher on the session after clearing out chart points around 4.52% and 4.55%. Similarly, the 2-year note gained about 7 basis points to 2.79% and the 2s-10s spread widened back out 3-4 basis points to +182. Hedge fund liquidation and bearish "put" spread options structures across the maturity spectrum exaggerated the sharp moves, says Action Economics.

From Action Economics

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