Friday, May 1, 2009

Upcoming Treasury auction weighing down on the stock market

The stock market can't seem to decide whether it wants to go up or down. It spent just about entire April that way, and today, first day of "Sell in May and go away" May, it's flat again. How many dojis can the market chalk up until something gives?

Potential market-moving bad news turns out to be duds (e.g. a really, really bad GDP number, bankruptcy filing of a major auto company) and the indices just sit. Seeing this action (I should say non-action), every day sees a new analyst, pundit making a pronouncement that this may really be a start of the new bull market. The most recent is Abby Joseph Cohen of Goldman Sachs, saying she expects the broad stock market to finish higher this year, with the U.S. economy "at worst" experiencing a mild recession. (That sounds awfully familiar. I thought she stopped making predictions given her fantastic calls in 2007 and 2008.)

Weighing against this strangely positive mood, I think, is the bond market, which has been crowded with Treasuries the government must sell to fund the government operation. Next week is no different. US Treasury has to sell $155 billion worth of Treasury bills, notes, and bonds, all of that, in one week. Here's the schedule (data taken from Treasury Department's official announcements):

  • Monday May 4: 13-week bill, $30 billion
  • Monday May 4: 26-week bill, $28 billion
  • Tuesday May 5: 52-week bill, $26 billion
  • Tuesday May 5: 3-year note, $35 billion
  • Wednesday May 6: 10-year note, $22 billion
  • Thursday May 7: 30-year bond, $14 billion

    Total for the week: $155 billion

Oh, by the way... This one-week amount is about 35% of the debt that the Japanese government wants to sell this fiscal year.

... And Treasury will wait until Thursday to release the result of the "stress test".


Post a Comment