Bond report for March 31: Flight to quality?

ECONOMIC DATA 03/31/2009: all times EST

9:45 AM NAPM CHICAGO (35.0)

10:00 AM US CONSUMER CONFIDENCE (28.0)

ECONOMIC DATA 03/30/09 NO MAJOR ECONOMIC DATA RELEASES TODAY.

TREASURIES REBOUND ON WORLD RALLY IN GOVERNMENT DEBT AS EQUITIES FALL ON CONCERNS REGARDING POSSIBLE BANKRUPTCY OF U.S. AUTOMAKERS, BANKING CONCERNS.

U.S. Treasuries began the week with gains across the entire yield curve, following along with a world rise in government debt, as equities tumbled in the wake of renewed concerns with regards to global financial institutions requiring additional financial support and the U.S. government’s rejection of the turnaround plans proposed by General Motors and Chrysler. The tough stance taken by the U.S. Government, which has already committed over $100 billion in economic lifelines to the struggling industry, leave the institutions open to possible declarations of bankruptcy if unable to formulate workable alliances and strategies. The U.S. Government stated in its tough rhetoric so far that these companies must reinvent themselves so as to not become “Wards of the State.”

Gains in Treasuries remained somewhat conservative as supply concerns remain an undertone in the marketplace. In addition, the market was somewhat disappointed by the Federal Reserve’s lackluster purchase of slightly under $3 Billion of US 30-year bonds. The markets were expecting purchases in the realm of $5-$5.5 billion today. Major rallies in Treasuries could likely remain muted throughout the week as the effect of dismal employment figures due out at the end of the week challenge the expected policy conflicts regarding global economic stimulus that is expected to present itself publicly at the G20 Economic Forum which begins this coming weekend. In addition, competition from high yielding corporate debt is also placing a ceiling on gains in Treasuries for the time being.

Technically, June 30-year bond futures appear to be losing upward momentum and should hit a key resistance level at 130.17. If this level holds, look for the market to stage a pullback to 126.16, with key support level remaining in place at 125.12.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US M9 (US 30 YRS)

128.175

129.310

128.075

128.305

+13/32NDS

TY M9 (US 10 YRS)

123.150

124.055

123.105

123.245

+14/32NDS

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.

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