US Treasuries fell for another session as the dramatic rally in equities and the ongoing concerns regarding Treasury Debt supplies continued to pressure the long end of the yield curve, with 30 year and 10 year futures falling the most during the session. These debt instruments are under additional scrutiny this week as the markets await the results of their respective auctions. $18 billion of US 10 year notes is scheduled to be auctioned on Wednesday and $11 billion of 30 years on Thursday. Tuesday’s record auction of $34 billion of 3 year note resulted in a respectable 1.48% yield and an average bid to cover ratio of 2.26. Shorter yielding instruments (2 years through 5 years) appear to holding up relatively well in terms of demand, as this time frame is not as vulnerable to the potential juggernaut of post recession/recovery inflation pressures.
Today’s downward move in Treasuries was also heavily influenced by the recovery in equities after a surprise announcement by Citigroup that the beleaguered financial institution was on track to posting positive earnings for the 1st quarter of 2009. Anticipation of a possible foundation that financials can start to build revenues on is one element which could contribute to further negative sentiment for Treasuries, provided the Citigroup earnings news is followed by other financial institutions and is not an example of the “buy the rumor, sell the fact” scenario.
Technically, June 30 year futures continue to range trade within the channel established in late January. The market appears to be setting up to test support level at 123.10. Before that test, market could post a short cover rally to 125.170. Renewed upward momentum is likely to find resistance at 126.225.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US M9 (US 30 YRS)
126.140
126.155
124.160
124.305
-1.075/32nds
TY M9 (US 10 YRS)
121.255
121.260
120.210
120.265
-26/32nds
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