Prices of Treasury coupon securities have slipped modestly in overnight trading as angst-filled investors await the announcement of the result of the FOMC conclave which will conclude today. ECB President Trichet reiterated that the ECB is on “heightened alert” and that added to the uncertainty and anxiety. Additionally, financial concerns diminished somewhat in Europe as Barclays (BCS) successfully raised nearly $9billion in new capital. (Quiz. Since the credit crisis began about a year ago, has there been even one equity deal which has been profitable for investors? I don’t think so but I am willing to listen if such a deal exists.)The yield on the benchmark 2 year note has increased by 4 basis points to 2.92 percent. The yield on the benchmark 5 year note has also climbed 4 basis points to 3.56 percent .The shift in the yield curve remains parallel as the yield on the 10 year note is higher by 4 basis points placing the yield on that actively traded security to 4.12 percent. The Long bond has been the star of the overnight session as it has climbed by just 3 basis points and it sits at 4.67 percent.

The 2year/10 year spread is 120 basis points.

There is no supply from the Treasury today as Hank Paulson and his crew allows market participants to digest the FOMC remarks which will be released at 215PM New York time.

Here is a bit of anecdotal evidence which might concern the solons at the Fed.The NFIB, which is the National Federation of Independent Businesses and bills itself the leading voice of small businesses, notes in a survey that the percent of small businesses citing inflation as a problem has jumped to 17 percent in June. That is the highest such reading since June 1982.

Remittance Day

Today is remittance day in the murky world of subprime mortgages and that means participants get a snapshot of the loans which have caused so much financial pain. Delinquencies continue to increase in dollar terms and percentage terms. However, the pace of increase has slowed significantly.

Voluntary prepayments have slowed to about a 5 CPR. That is a very low number and since these loans are binary (they get paid off or default) it would indicate that unless a substantial source of liquidity appears, many more of these loans will end up sour.

Liquidations have also increased.

Severity (the percentage of principal lost )  remains about the same except for 07-2 loans which have seen an increase of about 5 percent.