ECONOMIC DATA 02/13/2009: all times EST. 9:55 AM US CONSUMER SENTIMENT (61.0)
TREASURIES TRADE IN VOLATILE SESSION, TAKING CUES FROM EQUITY MARKETS & VERDICT FROM DISAPPOINTING AUCTION RESULTS.
U.S. Treasuries traded in a choppy session, taking its cues primarily from movements in equities as well as the ongoing disappointment in auction results from government debt instruments on the longer end of the yield curve that appear to not be tied to the timeframe of the economic downturn/recovery cycle for the global markets. Treasuries initially bounced between gains and losses as reports on retail sales and weekly jobless claims offered a conflicting view of near term consumer sentiment. Negative perceptions regarding equity value appeared to win out, causing bonds to rally. Thirty year futures fell to their lows of the session after a disappointing auction for a record $14B of 30 year bonds. With a yield of 3.81% and a bid to cover ratio of 2.02, the final auction for this record week of offerings followed the precedent set by the recent U.S. 5 & 10 year auction. U.S. debt further out on the yield curve continues its uphill struggle to find demand due to the belief that current yields are too low to compensate for the deficit position of the issuer (the U.S. government), potential inflation, and competition from corporate yields that should prove more attractive for longer term financial commitments.
Treasuries ended the session with a renewed volatility, rallying back as equities retested February lows then falling back to nearly unchanged after the late day rally led by the Nasdaq and support by the announcement of a new cooperative between government and banks to subsidize mortgage payments for homeowners near foreclosure. This perceived step in the right direction for saving homeowners leaves the direction of Treasuries in question, as the unfolding of these plans will spell out the commitments of government and private financial institutions. Depending on the balance that is struck, Treasuries could be setting up for a relief rally due to a perceived drop in the amounts being shouldered, thereby increasing the quality of U.S. debt or the markets could be in for a strong drop as perceived value of U.S. debt instruments drops in favor of better capitalized opportunities.
Technically, March 30-year futures are trading at the high end of their recent range & appear to be setting up for a possible pullback to retest recent lows. Look for an initial pullback to the 126.14 level, with a break of significant support at 125.00 offering the opportunity for downward momentum to accelerate a move to the 121.00 level. Upward movement should find initial resistance at 129.140, with a stronger ceiling at 131.00.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US H9 (US 30 YRS)
128.255
129.150
127.135
129.090
+17.5/32nds
TY H9 (US 10 YRS)
123.220
124.105
123.170
124.050
15.5/32nds
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. 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 as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
