March 10th, 2009

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Bond futures offered on stock market bid

The equity markets finally found footing on Tuesday and the new found optimism weighed on Treasuries.  Additional pressure came at the hand of $34 billion in 3-year notes being issued at a "respectable" offering.  Along with government backed issues, corporate bond selling is working against Treasuries. 

Similar to yesterday, there was very little in the way of economic news.  Wholesale inventories was the only release and traders didn't seem to pay much attention.  The government reported that wholesale inventories dropped .7% last month, much more than had been expected. 

What Tuesday's session did have, that Monday's didn't, was the added insight of Washington  officials.  Bernanke spoke in regards to banking regulations and the necessity to revive the banks before the economy can follow suit.  Overall, Bernanke's comments were stock friendly and bond heavy.  He suspects that there could be growth as early as 2010 should the circumstances fit. 

In the meantime, Treasuries continue to be largely range-bound.  Given the circumstances it seems as though the note and bond are destined for support near 119'22 and 123'06 respectively.  If you are a five-year note trader, there seems to be significant support at 116'07 then again near 116'01.  Should equities continue their short covering rampage, it may be possible to buy the 5-year near 116 and it may be good for a temporary bounce.  The June 5-year tends to see a rather large and quick rally from mid-March through the 20th.  That said, traders shouldn't get greedy.  Beyond the 20th, the market typically sells off relatively sharply. 

If you took the June Eurodollar trade, look to exit near 98.65.

* 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.