ECONOMIC DATA 02/05/2009: 8:30 AM-U.S. WEEKLY UNEMPLOYMENT REPORT (583K), U.S. NONFARM PRODUCTIVITY (1.1%), UNIT LABOR COSTS (+2.9%)10:00 AM U.S. FACTORY ORDERS (-3.0%)10:35 AM EIA NATURAL GAS REPORT
TREASURIES CONTINUE THEIR FALL AFTER TREASURY ANNOUNCEMENT OF RECORD LEVELS OF OFFERED DEBT FOR FEBRUARY, BETTER THAN EXPECTED EMPLOYMENT, SERVICE INDEX NUMBER
U.S. Treasuries fell for a second session, but rallied off their session lows, after the U.S. Treasury announced a record auction amount for February of $67 Billion. The bulk of the debt is expected to be at the longer end of the yield curve (3, 10, 30 years). The announcement also included plans for the reissue of a 7-year note and 20-year bond. Negative sentiment gripped the Treasury debt complex as concerns regarding the ability of the markets to absorb this huge supply of debt combined with beliefs that the focus on using longer-term debt for stimulus funding will leave a disproportionate level of the U.S. governments obligations open to inflation pressures. Long-term debt is more sensitive to inflation pressures while shorter-term obligations are influenced more by changes in fiscal policy and interest rates.
Treasuries came under additional pressure in the morning session after reports showing a less than expected loss in private sector jobs as well as better than expected reading from the ISM non manufacturing index appeared to be setting the stage for Treasuries to make a test of recent key support levels as funds moved from secure fixed income to more risk accessible instruments such as equities. As equities began to fail due to concerns regarding earnings and outlook for financials, Treasuries managed to regain some strength and rose off their lows. The markets will likely trade in a narrow, choppy range, with some possible short covering ahead of Friday’s U.S. Nonfarm Payroll and Unemployment figures for January.
Technically, March 30 year futures managed a near test of the new support level of 125.12. The closing range of the market suggests that it is sitting near a key Fibonacci retracement level. This would appear to indicate that there is room to short cover up to the 127.08. Resumption of downward momentum will set up for retest of 125.12 with next level of strong support at 123.25.
U.S. DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
U.S. H9 (U.S. 30 YRS)
126.130
127.120
125.250
126.205
-10.5/32nds
TY H9 (U.S. 10 YRS)
122.060
122.175
121.170
122.035
-14.0/32nds
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.
