April 22nd, 2009

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Offered Treasuries on stock dependence

The long bond lead Treasuries lower in early morning trade and the theme continued throughout the day.  The selling began prior to equities forging a comeback from overnight lows, but any technical bounce from oversold conditions in bond and notes was prevented by stability on Wall Street.

The Fed didn't show up to buy Treasuries and neither did traders.  There was little news for the market to digest and even less for me to write about. 

The U.S. dollar index was under pressure and this likely paved the way for weaker Treasuries.  In a broad sense, a weaker greenback may deter foreign investors and in a dramatic revaluation even panic many of those currently holding domestic assets to seek investments in an alternative currency.  Many economists agree that the Obama administration seems to be leaning toward a weak dollar policy, and this could be detrimental to Treasury prices in the end.  However, I don't see an immediate slide extending beyond 123 in the T-Bond. 

As bearish as today appears, we still feel like the risk is to the upside.  Bonds and notes are becoming slightly technically oversold and small speculators seem to be accumulating large short positions.  While I can't rule out the possibility for a slide to 124ish in the T-Bond I feel as though a bounce is near.  However, if my analysis is going to "hold water" equities will also need to turn over. 

The 5-year note looks to be preparing for a move to 117 and a maybe even a bit below.  We may look to put on a bullish strategy near just under 117 if we see it.  Likewise, Note traders may look to be "long" with either futures or options near in the mid 121's, let's see if the opportunity presents itself.

* 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.

April 22 - Those of our clients that didn't get in on the original recommendation were able to get in today at better prices.  Fills were coming in anywhere between 24 and 21.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

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.