U.S. Treasuries closed Tuesday’s session little changed as little flight to quality buying occurred in the wake of continued profit taking in equities. Overall risk tolerance appears to be stabilizing as evidenced by declines in the US dollar, which has been a safe haven currency throughout the global credit crisis.
Treasuries were also quiet due to a quiet auction landscape-the Treasury is not offering new debt for the next two weeks. This lack of renewed supply concerns has allowed market sentiment to take advantage of price support from the Federal Reserve’s apparent stepping up of Treasury Debt purchases. The Fed bought about $6 billion worth of US notes due to mature in 2012 and 2013. While the purchases were lower than previous levels at this maturity, growing sentiment that the Federal Reserve is likely to pick up its pace of US debt purchases as Treasury returns have slumped to their worst returns since the mid 1990’s is offering positive support to prices-in the near term at least.
This support may decline as sentiment wanes in the face of growing concerns regarding the reemergence of inflation as well as rising beliefs that futures programs such as Social Security and Medicare are likely to suffer dramatically due to the redirection of resources toward the immediate credit and economic issues. Supply issues will likely return to pressure the market once the specter of the unprecedented Treasury auctions returns. Gains may be limited to short term recoveries testing and failing at key resistance levels.
Technically, June US 30 year futures continue to trade higher, but should meet strong resistance at 123-090. Support for the contract is setting up at 120-230. Downward target beyond this support level sets up at 118-260.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US M9 (US 30 YRS)
121-250
122-115
121-005
122-005
+8.5/32nds
TY M9 (US 10 YRS)
121-080
121-160
120-275
121-095
+1.0/32nds
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.
