Economic numbers for 12/03/08: 8:15 a.m. ADP employment report8:30 a.m. U.S. nonfarm productivity (0.9%), unit labor costs (3.6%)10:00 a.m. ISM nonmanufacturing survey (43.0). 10:35 a.m. EIA crude inventory
U.S. Treasuries climb after early pullback. Market continues to be supported by dwindling inflation concerns, impending rate cuts.
U.S. Treasuries moved higher Tuesday, pulling yields on the 30-year bonds down to a record low, as waning concerns regarding inflation and belief that the Federal Reserve will act as a guarantor of U.S. Treasuries, by purchasing U.S. debt in support of a low interest rate environment that will allow mortgages and commercial lending to be revitalized. Treasuries had little data to gain direction from today. There was an initial pullback in bond prices on the overnight session as the market sought to digest Monday’s massive spike upward after Fed Chairman Bernanke proposed that the Fed would consider purchasing Treasuries to support lower rates. Traders felt that the move upward on this “buy the rumor, sell the fact” perception did not warrant further gains without a pullback. Bargain hunting on equities and several attempts at rallies in crude oil over $50.00 also supported the pullback in Treasuries to a key support level.
Treasuries rallied off support and regained upward momentum as equities appeared to be unable to hold onto earlier gains, inflation concerns waned as energy prices fell back through multiyear support levels, and global coordination of aggressive central bank policies reignited bullish sentiment. These record low yield levels on Treasury debt have not discouraged buyers as the sentiment of the “last man in” with regards to buying at the top of the price range has not taken hold. Expectations of weak employment and services data due to be released on Wednesday also offered a catalyst for Treasuries upward momentum. Markets may seek a stronger pull back on digestion and acceptance of poor data.
Technically, 30-year futures retraced back to a key support level of 129.20. The filling in of this gap allowed for further movement to the upside. The daily and 60-minute RSI show 30-year bond remains at or near an overbought condition. A downward correction could bring the market back to a level of 130.08, with a key support at 128.25. Initial resistance should be at 132.06.
March 30-year futures settled at 131.075, up 19/32nds. March 10-year settled at 122.25, up 8/32nds.
Rich Roscelli and Paul Brittain
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