ECONOMIC DATA 02/11/2009: all times EST. 8:30 AM INTERNATIONAL TRADE (-$34 BILLION). 10:30 AM EIA INVENTORY REPORT (OIL). 1:00 PM U.S. 10-year NOTE AUCTION ($21 BIL, PREV B/C 2.59)
TREASURIES RALLY AS STIMULUS PLAN LAYOUT BY TREASURY FALLS FLAT. EQUITIES FALL, INVESTORS RUN TO SECURE DEBT. MARKET GAINS ON WELL RECEIVED U.S. 3-YEAR AUCTION
U.S. Treasuries post strong gains off of support areas as traders and investors voted with their dollars, pounds, yen, etc. out of equities and into the security, if not necessarily quality, of government fixed income. Treasuries received an initial push to the upside from a report on U.S. wholesale trade dropped at a greater level than expected. The pace of inventory drawdown has been unable to match the fall in sales demand.
The greatest gains occurred after Treasury Secretary Geithner offered an outline of nearly $2 trillion of programs designed to unfreeze credit markets. The lack of definitive structure and timeframes offered by the outline caused equity markets to freefall, returning all of their gains from last week and spurred buying in the long end of the yield curve as the hunt for secure yield returned. Passage of the Senate version of plans totaling nearly $868 billion failed to deter fixed income buying as concerns that the plans will not effectively address the credit problems within a time frame deemed practical overcame issues regarding the enormous amount of supply and perceived inflationary pressures. Expectations are for the markets to remain volatile, with today’s move an example of an expanding channel which could result in a pullback as markets continued to digest the effects, both current and future of record supplies of government debt.
Technically, U.S. March 30-year futures have moved into overbought territory on 30 and 60 minute RSI (Relative Strength Index) charts. While this may not signify a dramatic change in trend, it does suggest that there could be a pullback to fill in the gap left by Tuesday’s rally. Look for possible retracement back to 126.160 levels in order to fill initial gap, with support at 125.160. Upward movement should meet resistance at 129.19, with additional key level to be found at 131.170.
U.S. DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
U.S. H9 (U.S. 30 YRS)
126.025
128.155
125.300
127.290
+2 075/32nds
TY H9 (U.S. 10 YRS)
121.225
123.135
121.190
123.030
1 17/32nds
Rich Roscelli and Paul Brittain
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