March 26th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage!  Don't forget to write a review on Amazon.

7-year note auction goes O.K.

After yesterday's flailing 5-year note auction and failing UK gilt auction, Treasury traders let out a sigh of relief on a respectable 7-year note auction.  Analysts point out that given the massive supply and the Fed's big bark/small bite Treasury buying bonds and notes seem to be holding up relatively well. 

Corporations continue to join the Fed in big borrowing.  Sunoco Inc. sold $250 million in 6-year notes, Berkshire Hathaway Finance sold $750 million in 3-year notes, Rubbermaid sold $300 billion in 10-year notes...

Don't forget that both large and small speculators are still heavily short Treasuries, despite the recent spike high aimed at "squeezing" them out of the market.  Should the market fail to make progress on the downside could trigger a wave of short covering. 

Similar to the day's auction, the fourth quarter final GDP wasn't quite as bad as it could have been.  The market has already accounted for a dismal economy so anything that is reported to be less than disastrous is having little immediate effect on trade.  However, I do believe that a majority of the post-auction gains in the 30-year and the 10-year were a delayed reaction to the poor economic reading. 

Bond have been consistently trading counter-trend on Fridays.  I am going to continue to lean higher despite the recent weakness.  We think that the 30-year could see 130'15 in the coming sessions.  The 10-year note has potential to rally to 125'12.

Oops, there was a typo in yesterday's newsletter.  It should have read this "We would like to see a move in the June Eurodollar near 98.90 at which point we would prefer the short side."

* 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.

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.