U.S. Treasury Bonds Under Pressure

By: Lloyds_TSB

US treasuries were under pressure most of yesterday, ahead of heavy issuance this week. There was some follow-through to higher UK swap rates, but these fell back after market sentiment for equities turned negative towards the close of play. Ahead today, the CBI distributive trades survey will provide an early indicator of UK retail activity in October.

As the chart below shows, the survey tracks official ONS retail sales reasonably well, though month-to-month variations can be significant. According to the survey, retail activity has improved from its weak levels a year ago, but remains below the long-term average. A slight improvement in the survey's reported sales balance is anticipated.

Euro zone monetary statistics for September are also due. A further easing in the growth rate of M3 money supply to around 2% is expected. The figures will also confirm whether loans to the private sector continued to decline. In the US, the latest Case-Shiller house price data are expected to show a further easing of the annual rate of decline this afternoon. Perhaps more interesting will be the release of the Conference Board's consumer confidence survey. We have pencilled in a second consecutive decline to around 52 in October from 53.1, though the market consensus is for a marginal rise.

Key speakers today include ECB member Stark and Bank of Canada Governor Carney. The US Treasury offers $44bn of 2yr notes, part of the $123bn of supply expected this week.

Lloyds TSB Corporate Markets Economic Research

For more information: Emile Abu-Shakra Manager, Media Relations Lloyds TSB Group Media Relations Tel 020 7356 1878 http://www.lloydstsbcorporatemarkets.com/

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