April 17th, 2009

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Better equities forced safe-havens lower

Bonds and notes were battered in better, but still light, volume to end a painfully long week.  Although economic data was scarce, Fed speak was not.  Federal Reserve Chairman Ben Bernanke confirmed that credit cycle damage is likely to be long lasting and San Francisco Fed President Yellen reminded us that the economy is not out of the woods.  Each of these comments were bond friendly, but traders seemed to focus more on Dallas Fed President Fisher's claim that he is more concerned with deflation than inflation.

Also helping the bond bear camp, was a much better than expected reading on the Michigan Consumer Sentiment.  The index was reported at 61.9, and suggests that the public tensions have eased and that investors may look to riskier assets going forward.

I can't help but feel as though the stock and bond markets are due for a reversal, if not intermediate-term at least temporary.  With both markets trading near what seem to be relatively extreme pricing in regards to valuations thus far in 2009, we could see a much different picture at some point next week. 

In yesterday's newsletter we stated, "We favor the upside from beneath 126 and on a big enough dip may even be willing to recommend a bullish strategy", and that is what we did.  Our clients were recommended to sell the June Bond 118 puts near 20 ticks (fills were coming in at 19) today following the dip.     We also recommended the purchase of a June 5-year note futures near 117'12.5.  We see strong support near 117'08. 

* 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.

April 17 - We recommended to sell the June Bond 118 puts near 20.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

April 17 - We recommended to buy a 5-year note futures contract near 117'12.5

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

*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.