March 30th, 2009

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Bonds and notes eek higher

The Treasury futures markets have made it a habit of giving up market bids in afternoon trade.  At the close of the day session, the 30-year T-Bond was nearly a handle off of its high.  This was nearly identical to Friday's trading pattern.  The good news for the bulls is that the market is creeping higher, the bad news for the bulls is that it is moving slowly enough to allow for a lot of second guessing. 

The volume has been painfully light, leaving the market vulnerable to sharp breaks one way or the other.  For now, we are favoring the upside as it seems as though equities are having a difficult time swallowing government intervention into capitalism. 

Similar to the last round of Fed buying, Treasuries made their way higher in anticipation of quantitative easing but relaxed after the fact.  In the case of today, the Fed only bought $2.5 billion in securities as opposed to the previous rounds of $7.5 billion.  One would think that the disappointment would have forced bonds and notes immediately into the red but that wasn't the case. 

The most influential story of the day was the Fed's big three auto bailout plan.  Clearly, the more taxpayer money that is thrown into the black hole the more money the Fed will have to borrow. With a lack of economic data, supply concerns remain the dominant force. 

Both the long bond and the 10-year note managed to hold support as measured by the Fibonacci ruler and could be in the process of retesting the recent spike high.  In the meantime, we will continue to look for our first target area in the mid-to-high 130's in the T-Bond and mid-125's in the note. 

We still like the short side of the Eurodollar from better levels and will be patient for what we deem to be optimal entry. 

* 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.

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Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

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Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

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*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.