April 23rd, 2009

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Fed buys more Treasuries...

Fundamental weakness in the economy and instability on Wall Street has yet to provide the bullish punch that some were looking for as supply concerns have kept all attempted rallies in check.   

The Fed bought another $7 billion in Treasuries on Thursday in another attempt to thaw out the lending markets, particularly mortgages.  This is in addition to the $7.3 billion spent earlier in this week.  However, with $101 billion in Treasury notes slated for auction next week the Fed's efforts went relatively unnoticed. 

The day's data lacked a surprise factor, as a result prices traded in relatively sideways action.  A slightly better than expected jobless claims number and a moderately worse than expected existing home sales tally failed to ignite excitement in either camp.

The dollar remains under pressure, but Treasury traders seem to have blocked out the currency markets all together. 

In yesterday's report we pointed out the possibility for a slide to "124ish" in the T-Bond but were also looking for some sort of bounce given the large speculative short positions.  Today's move to 124'12 may have been what we were looking for.  We suspect that tomorrow will bring some counter-trend buying as traders reposition going into the weekend.  Once again, we will need equities to break below support to trade closer to 800 in the S&P for the rally to materialize.

Likewise, we mentioned that note traders may want to be "long" near the mid 121's and at the time of this report, those proactive enough to follow the advice should have  been doing relatively well. 

* 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.