ECONOMIC DATA 03/18/2009: all times EST
8:30 AM US CPI (CONSUMERS PRICE INDEX) (0.3%, EX FOOD & ENERGY 0.2%)
10:35 AM EIA INVENTORY REPORT (CRUDE OIL, PRODUCTS)
2:15 PM FOMC MEETING ANNOUNCEMENT (RATE POLICY LEFT UNCHANGED)
ECONOMIC DATA 03/17/09 US HOUSING STARTS (583 K VS.450K), US PPI (PRODUCERS PRICE INDEX) (0.1%VS.0.4%, EX FOOD & ENERGY0.2% VS. 0.1%)
U.S. TREASURIES CONTINUE TO FALL AS SUPRISINGLY UPBEAT HOUSING DATA REIGNITES EQUITIES, CONCERNS REGARDING SIZE OF NEXT WEEKS AUCTION.
U.S. Treasuries posted another decline as their inverse relationship with equities continues (No overpowering “Buy American” sentiment). A better than expected reading on producer prices and new housing starts brought back buyers that gave up on the markets yesterday after tech stocks stalled. The return of equity buyers further eroded the perceived need for the security of Treasuries.
In addition, debt buyers were stimulated by reports that corporate bond sales, which offer significantly higher yields than Treasuries, were being well accepted by the markets. The notion of relatively well capitalized companies with ample cash reserves in a fundamentally sound business offering 2 to 3 times the rate of return of a U.S. Treasury has become quite attractive to a number of portfolio managers and investors. Treasuries also contended with the expectation of an aggressive fiscal and monetary policy stance from the FOMC meeting announcement tomorrow. One can notice that there has been little fanfare regarding this meeting. That is because the overwhelming consensus is for the zero rate policy to continue.
Because the traditional tools of the Federal Reserve (Interest Rate Policy) have essentially been exhausted, any increases in “aggressive fiscal policy” will likely be funded by government debt. Concerns regarding debt supply also pushed US government bond prices south as the markets are expecting over $90 billion of Treasury debt to come to auction next week. Further downside could be limited if the Federal Reserve offers further indications that it will enact direct purchases of Treasuries in order to support overall prices and maintain confidence in the debt instruments.
Technically, June 30-year futures continue within its current channel with movement toward the downside of the range. Indications are that the market should still remain range bound for the time being. This could result in a retracement back to 124-24 initially in the short term. A breakout to the downside should offer a signal of the market moves through and holds below 122-20. If this occurs, look for the market to find support at 121-03.5. Strong resistance should occur at 127-15.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US M9 (US 30 YRS)
124.315
125.315
123.280
124.075
-23.5/32nds
TY M9 (US 10 YRS)
121.150
121.275
120.265
120.300
-19/32nds
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.
