ECONOMIC DATA 01/09/2009 (ALL TIMES EST): 8:30 AM-U.S. NONFARM PAYROLL (-500000).U.S. UNEMPLOYMENT RATE (7.0%). AVERAGE HOURLY EARNINGS (0.2%). AVERAGE HOURLY WORKWEEK (33.5)
TREASURIES REBOUND ON BETTER THAN EXPECTED 10 YEAR AUCTION, TREASURY PURCHASES DEBT TO DRIVE MORTGAGE RATES TO NEW LOWS.
U.S. Treasuries staged a rally on Thursday, as better than expected results from a $16 billion auction of 10-year notes signified a return of perceived value in higher yielding government debt instruments. Treasuries received additional support from the Federal Reserve purchase of $10.2 billion of agency mortgage bonds in an effort to lower mortgage rates. This represents the first of these purchases for 2009 and resulted in a drop in many fixed 30-year mortgages below 5.0%. Expected increase in mortgages refinancing would give a boost to Treasuries, particularly the 30-year bond, as mortgage providers will look to buy government debt as a hedge.
The Bid to Cover ratio for the auction came in at a better than expected 2.59, with the yield at a record low of 2.419 for a coupon rate of 3.75 %. The success of this auction brings back to light the influence that government debt will have as a foundation for financial portfolios, both institutional and consumer based, due to the more attractive yield levels on longer-term debt. Expectations for a long economic recovery despite President Elect Obama’s call for quick passage of a $775 billion stimulus plan could result in a resurgence of Treasury buying as a foundation for securing returns on portfolios, particularly at these levels which appear to be setting up as a range where the initial elements of the economic recovery as perceived by the government can begin to work.
Technically, 30-year bond futures remain in a tight channel. The market did trade up to the resistance level of 133.12 before retreating back below 133.00. The market appears trapped in a tight channel with support levels beginning to increase. Look for new longer-term support level at 129.21. A breakout to the upside could see Treasuries rally to 134.00, with momentum building above this level to 135.14.
U.S. DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
U.S. H9 (U.S. 30 YRS)
133.095
133.095
132.190
133.005
+ 10.5/32NDS
TY H9 (U.S. 10 YRS)
124.270
125.200
124.205
125.100
+26.5/32NDS
Rich Roscelli and Paul Brittain
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may, in the normal course of business, have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell because of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
