Treasuries rise as Cyprus puts markets in risk-off mode

Financials: June Bonds are currently 1’04 higher at 143’00 and the 10 Yr. Note 14 higher at 131’11. The imposition of a levy on Cypriot bank deposits has sent the market once again in “risk-off” mode as participants headed for safety in U.S. Treasuries. The implications of these actions are still not clear. The ECB, EU and IMF have demanded that Cyprus come up with in excess of €5 billion to be bailed out for an additional estimated €12 billion. The market worry is how will this affect other bail outs and deposits in Spain, Greece, Italy and Portugal. The case in Cyprus is a bit different because it is considered a haven for deposits from individuals from other countries and deposits have swelled well beyond Cypriot GDP and banks have had to invest money in countries other than Cyprus. It is rumored that Cypriot banks have a wrong way bet on Greece and are now in need of recapitalization of up to 80% in some circumstances. For the moment Bonds have broken through resistance of 142’26 (overnight high of 143’24). For the near term treat as a trading affair between 142’11 and 143’28. If the market should trade above the 144’00 level my bias will return to negative from my current neutral bias.

Grains: May Corn is currently 5’4 lower at 711’4, May Beans 16’2 lower at 1410’0, May Wheat 9’2 lower at 713’6 and Dec. Wheat 5’6 lower at 733’2. We remain long out-of-the-money call spreads in Dec. Wheat. As for outright futures positions, I remain on the sidelines awaiting a break to the 675’0 area in May Corn for a buying opportunity.

Cattle: On Friday Apr. LC closed 227 lower at 125.77 and Apr. FC 197 lower at 139.10. These market closed on new contract lows. My bias remains negative, although I am currently on the sidelines having recommended covering all short speculative positions last Wednesday and Thursday and missed out on Friday’s break. The early call this morning is steady as the market absorbs the implications of ECB actions in Cyprus and how it will affect the dollar, Feed Grain prices and meat exports.

Silver: May Silver is currently $0.13 higher at $29.00 and Apr. Gold is $14.00 higher at $1,608.50. The market is higher this morning as Gold once again appears to be a haven of safety in the wake of bank levy’s in Cyprus. If the rally holds above the $1,597.00 level, gold will generate a technical buy signal. For the moment I will be a buyer in the $1,592.00 area with a $10.00 risk. We remain long Silver.

S&Ps: June S&Ps are currently 13.00 lower at 1540.50 with an overnight low of 1529.50 as the market reacts to the banking situation in Cyprus. Near term support of 1541.00 has been broken putting the next level of support in the 1525.00 area. If you went short at Thursday’s stated resistance of 1557.00 either take profits of use a close stop. For consideration: If you are currently short consider selling an out-of-the-money put for either May or June expiration against your current position. Currently the May 1500 put is trading at 18.00 and the June 1500 put at 27.00.

Currencies: As of this writing the June euro is currently 109 lower at 1.2953, the Swiss 48 lower at 1.0598, the yen 41 higher at 1.0524 and the pound 23 higher at 1.5095. Given the situation in Cyprus (See Financials comment) the euro has acted as expected gaping lower and falling to new recent lows (overnight low was 1.2892). I am currently on sidelines.

About the Author
Marc Nemenoff

Mr. Nemenoff is a 40-year veteran of the futures industry. While attending graduate school at the Illinois Institute of Technology, Marc took a job as a clerk on the trading floor of the Chicago Mercantile Exchange. Over the years he grew to become an independent member of the exchange and spent many years as a trader, market maker, lecturer, and committee member. Since 2004 Marc has been a senior broker and analyst handling customer accounts for both speculators and hedgers in addition to institutional traders. Marc is also the author of The Nemenoff Report, a daily overview of the markets that includes his own perspective on market direction. Mr. Nemenoff describes his approach to the market as 75% technical and 25% fundamental and is also a firm believer in the use of option strategies as a way of using leverage and minimizing risk when one has a long-term market strategy. You can contact Marc by phone at (888) 908-4310 or by email at mnemenoff@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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