ECONOMIC DATA 05/05/09: all times EST
10:00 AM ISM NON-MFG INDEX (42.0)
1:00 PM US 3 YEAR NOTE AUCTION ($35 B)
SUMMARY OF DATA 05/04/09
US CONSTRUCTION SPENDING (0.3% VS -1.0%), PENDING HOME SALES INDEX (84.6 VS.82.1).
U.S. TREASURIES POST QUIET SESSION. GAINS FROM FED BUYING MUTED BY BETTER THAN EXPECTED READINGS ON CONSTRUCTION AND HOUSING. SUPPLY CONCERNS LOOM.
U.S. TREASURIES posted gains in a relatively quiet session, posting gains derived from stepped up buying of U.S. debt by the Federal Reserve ($8.5 billion). The Fed seems to be taking advantage of some dollar cost averaging strategies by stepping up its purchases near the highest yields (lowest prices) since November of 2008. Additional interest in Treasuries likely occurred from short covering and establishment of new positions ahead of volatility stemming from the release of employment data beginning on Wednesday and culminating with Friday’s U.S. Bureau of Labor Statistics readings on U.S. nonfarm payrolls and unemployment for March.
A less direct, but potentially significant force on Treasury prices arose today from comments from the Obama administration regarding its intentions to crack down on tax policies that corporations have employed to benefit from shifting jobs overseas and deferring tax payments on income earned from overseas enterprises. The breakdown of these tax policies could result in massive new streams of revenue for the government at the expense of corporate dividends and debt, thereby making Treasury debt more attractive with regards to the U.S. government’s overall balance sheet. This development bears close observation.
There were significant events which limited further gains in Treasuries. Equities staged a strong rally to begin the week after better than expected data on U.S. pending home sales contributed to positive sentiment for stocks which began in the Asian and European sessions. The major indexes managed to cross into positive territory for 2009, with the S&P 500 closing above the significantly important 900.00 level.
Technically, June 30-year futures closed just above a 50% Fibonacci retracement level of 122-065. Combined with an RSI reading near 35, it would stand that Treasuries may continue to correct back to the upside for the remainder of the week. The upward retracement should find initial resistance at 123-04, with significant resistance at 124-08. Support sets up at 121-16 with a significant level setting in at 119-31. If that target support is breeched, Treasuries could set up for a retest of the 117-00 levels.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US M9 (US 30 YRS)
122-080
122-250
121-240
122-165
+11.5/32nds
TY M9 (US 10 YRS)
120-250
122-250
121-240
120-290
+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.
