March 9th, 2009

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Treasuries range-bound on supply issues

Treasury notes and bonds were unable to hold recent gains in light of global supply pressures as well as another round of Treasury auctions.  Tomorrow kicks off the "auction packed" week with $34 billion in 3-year notes and $24 billion in 1-year notes being issued.  Analysts seem to be expecting decent demand for the shorter maturities but have doubts in regards to the longer dated maturities. 

Treasuries seem to be wandering aimlessly in search of guidance.  Unfortunately, it is a relatively slow news week so many traders will be looking toward equities for help.  Therefore, we believe that the negative correlation between stocks and bonds will be much more active this week than it has in the previous. 

It is getting harder and harder to write about a market that hasn't seen a significant price change in several weeks.  However, it seems as  though the risk of some sort of a breakout is mounting.  Seasonal tendencies alone suggest that aside  from a possible temporary rally in the near-term, Treasury prices should decline throughout the month of March.  From a technical standpoint, it seems as though failure  for the June 30 year bond to hold above 129 will lead to an eventual slide to 114.  Likewise, if the 10-year note can't trade and hold above 123 the path of least resistance will be lower to 115.  In the meantime, wishy-washy trade makes it nearly impossible to feel confident in any direction. 

The June Eurodollars, on the other hand, look to be setting up for an opportunity for the bulls.  Our clients were advised to buy the June contract near 98.46 in mid-session trade and we still feel good about the trade if you would like to get in at slightly higher levels.  Projections are suggesting a move to 98.73 but we would be happy with a smaller move if it happens in a quick time-frame.  Seasonal tendencies suggest that the June Eurodollar could see a moderate recovery in the coming sessions. 

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.  However, market analysis and commentary does.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

March 9 - Buy the June Eurodollar near 98.46.  We aren't recommending stops or insurance with options at this point in time. 

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.