April 15th, 2009

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Choppy but overall unchanged Treasuries

The absence of Fed buying and mixed economic news lead to a choppy but overall uneventful trading session.  Today's stalled rally makes many wonder whether Treasuries can continue higher without help from the Fed.  Our charts say yes, but only time will tell if our analysis will prove accurate.

Bond traders were looking to Wall Street for guidance, but came up short in light of a directionless equity session.  Stocks waffled near unchanged for much of the day, as traders are squaring ahead of option expiration and finding more excitement in regards to the tax tea parties.

TIC data reported that net foreign purchases of Treasury bonds and notes totaled $21.55 billion.  The news was supportive of the recent rally in that it suggests that despite yields and government spending, overseas investors continue look to Treasuries for a safety play. 

The most significant news of the day was the Fed's Beige book but the result was relatively predictable.  The economy is still contracting, although the highlight of the report was that 5 of the 12 districts reported that contraction had slowed last month. 

We are still "feeling" higher here.  First resistance in the 10-year note stands at 124'10 but a little over 125 in the coming sessions seems likely.   If we are right, the 5-year note should trade at or near 119 in the same time frame.  If you are watching the long bond, a break of 128'10 should lead to a retest of the 130 area.

* 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.