ECONOMIC DATA 05/27/09: all times EST
10:00 AM US EXISTING HOME SALES (4.67 M)
10:35 AM EIA INVENTORY (CRUDE OIL, PRODUCTS)
1:00 US 5 YEAR NOTE AUCTION ($35 B)
SUMMARY OF DATA 05/26/09
US CONSUMER CONFIDENCE (54.9VS 43),
US 2 YEAR NOTE AUCTION ($40 B BID TO COVER 2.94, YIELD 0.94%)
U.S. TREASURIES FALL FROM EARLY GAINS AS SUPPLY CONCERNS, RALLY IN EQUITIES OVERSHADOW WELL RECEIVED AUCTION, GEOPOLITICAL TENSIONS.
U.S. TREASURIES returned to negative territory after early gains due to increased geopolitical tension as North Korea increased the boldness of its weapons program in defiance of UN condemnation. Treasuries began to show signs of weakness after a report showing housing price declines have begun to steady. Declines, particularly in the long end of the yield curve, increased inversely with the gains in equities after a report showing U.S. Consumer Confidence rose to 54.9, the largest gain since April 2003. The market traded in a slightly negative range near unchanged as traders awaited the results of the 1st of three US debt auctions this week.
The initial auction, $40 billion of US two-year notes, turned out to be the most well received since 2006. Bid to Cover (the ratio of bids on debt received divided by the bids accepted) came in at a very strong 2.94 (the average bid to cover ratio for U.S. two-years has been around 2.40) while the yield went out at 0.94%, two points lower than the expected rate. Foreign and non dealers were among some of the largest buyers, as appetites were heightened due to the hiatus in U.S. debt auctions and the desire to put money to work in the short end of the yield curve so as not to tie up funds for an extended period where inflation could likely erode the relatively low yield on debt further out on the curve. Not surprisingly, the long end futures failed to garner support from this auction. The divergence between the short and long end of the yield curve (steepening) is increasing as supply concerns continue to make investors wary of holding longer term government debt at historically low yields. Compensation for riding through the expected maelstrom of inflation needs to increase, as perceived by many fundamental and technical analysts.
Technically, June 30-year futures appear to be on track to test a key support level at 117-30. A break of this level could set the market near an initial oversold position at 117-16. Strong resistance in the contract has set up at 120-05. Look for an initial pullback to top out at 119-16.
US DEBT FUTURES
OPEN
HIGH
LOW
CLOSE
CHANGE
US M9 (US 30 YRS)
119-150
119-280
118-000
118-210
-21/32nds
TY M9 (US 10 YRS)
119-050
119-185
118-095
118-235
-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.
