Treasuries Holding in Asia Closely Eyeing Financial Sector

Friday saw the US Treasuries holding steady at the Asian market as investors closely watched the uncertainties in the US financial sector.  Questions as to how the developments will unfold are being closely monitored by investors.

US Stocks Edge the Treasuries

The US stocks edged the Treasuries on Thursday following a Wall Street Journal report that Lehman Brothers, one of the oldest investment banks in the United States, was intensely negotiating with prospective buyers which include prestigious institutions such as Bank of America, one of the largest financial institutions in the US.

In a related report, the Washington Post divulged the joint attempt of the US treasury Department and the Federal Reserve to broker and facilitate the outright sale of Lehman Brothers through a conglomeration of several private financial institutions and companies.

However, another big name in the financial sector came out that could be facing serious fiscal difficulties.  This development kept market players and participant on the leash thus effectively preventing steeper decline in bond prices.

Washington Mutual, another Big Victim of the Housing Slump

Washington Mutual Inc., received a below investment grade status recently.  The downgrade of its investment status was announced by the Moody’s Investors Service.  Washington Mutual is the largest savings and loan institution in the United States.  Moody’s explained that the rating downgrade was due to the bank’s difficulty in getting funding sources from the financial markets.

Treasuries have been hit by news about the state of the financial sector especially with the recent buy out rescue and take over of the US government on Fannie Mae and Freddie Mac, both mortgage lender institutions.

The ten-year note benchmark was unchanged and stands at a yield of 3.640 percent in late US trading.  Meanwhile the two-year note also remained unchanged at the close of trading as it registered a yield of 2.215.

The US financial sector is still under heavy cloud of doubt as uncertainties and worries worsen.  Market analysts said that the next wave of development in the financial sector could create a dent in bonds trading although it would be on a short term basis only.

Secretary Paulson’s Statements

Next week, the markets will await the plans on the move related to GSE rescue attempts.  This will rely on the argument of Treasury Secretary Henry Paulson justifying the bail out of Fannie Mae and Freddie Mac.  The pronouncement of Secretary Paulson will determine if the rescue is necessary.

Secretary Paulson and James Lockhart, current director of the Federal Housing Financing Agency are set to testify on a US Senate’s hearing on September 16.  The hearing was set by the US Senate’s Banking Committee.  The Federal Housing Financing Agency is the regulatory body governing the activities of government sponsored enterprises or GSE.