May 1st, 2009

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Not so bad data weighs on Treasury futures

A continuation of the string of less than devastating economic data leaves bonds and notes under pressure.  Contrary to the market's tendency to trade counter-trend going into the weekend, Treasuries started off the day in negative territory and remained there. 

The University of Michigan's consumer sentiment index was reported at 65.1, much better than the consensus estimates of just under 62.  As we all know, the consumer is the key to economic recovery...and if they feel better about their personal stability wallets may open up.  More importantly to Treasury traders, they may look to move assets away from low yielding securities and back into more productive ventures.  The ISM index also beat expectations, while factory orders were slightly worse than outlooks projected.

Also weighing on action is the overwhelming supply scheduled to be issued next week.  However, the Fed has only used up about $75 billion of the possible $300 billion earmarked for Treasury buying.  It seems as though they may be willing to step up their game in the near future in an attempt to keep mortgage interest rates low.  The Fed sees low borrowing costs as the bloodline to the ailing housing market, and in turn a way out of this recession. 

That said, the charts are telling us that there may be a little room for this market to move on the downside.  We still believe that the 30-year bond will trade slightly below 120 and the 10-year note has a chance to see the mid-119's...at which point it should be an attractive buy.  Likewise, we like the 5-year note near 116.

My weekend will be spent dealing with a broken main water line, hope yours is better than mine!!

* 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.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045

*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.