ECONOMIC DATA Jan. 27, 2009:
FOMC MEETING BEGINS
10:00 AM- US CONSUMER CONFIDENCE (39.0)
TREASURIES FALL AFTER BETTER THAN EXPECTED HOUSING DATA, REBIUND IN EQUITIES.
U.S. Treasuries fell as a rally in equities dampened demand for fixed income debt and the long end of the yield curve came under additional selling pressure as the first Treasury auction of the week resulted in a higher yield than expected. The short end of the curve also fell as reports on existing home sales and leading indicators resulted in surprise gains. Traders & Investors sold off 30-year futures down to significantly oversold conditions as the perception grows that supply issues will allow for better bargains in U.S. Treasury Debt.
Monday’s kickoff (Yes, Super Bowl is coming) of U.S. Debt auctions began with an $8 billion offering of 20-year TIPS (Treasury Index Protected Securities). The results were somewhat soft as the bonds drew a higher than expected yield of 2.50% with a bid to cover of 1.92. The expectation based on recent auctions was for a yield of 2.37% with a bid to cover of 1.98. (Bid to cover ratio is a measure of the number of bids divided by the number of bids accepted). An apparent weakened demand for long term debt designed to combat inflation, one of the significant results of oversupply would be expected to pressure long term debt that lacks this value erosion protection. Tuesday, the Treasury plans to offer $40 billion of two-year notes and Jan. 29 will be a $30 billion auction of U.S. five-year notes.
Technically, the 30-year market has reached and twice tested the key support level of 128.16. At this level, 30 & 60 min RSI shows the market approaching an oversold condition. The bounce from this area should result in a retracement to the 129.26 level, with significant resistance at 130.26. Further upward momentum beyond 132.00 could signify that the current downward trend may be poised for a reversal. Failure to break initial resistance should allow for downward momentum to break the 128.12 level and a set up to test 126.19.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US H9 (US 30 YRS)
129.060
129.230
128.220
129.075
-12/32nds
TY H9 (US 10 YRS)
123.150
123.300
123.070
123.210
-8/32nds
Prepared by Rich Roscelli & 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.
