Bonds and Notes Rally as Stocks Hold Friday’s Gains

The Fed spent the day buying agency debt and Treasuries while futures traders bought bonds and notes. Along with $5 billion in agency debt, the Fed purchases over $7 billion in longer dated Treasury securities. Some are also attributing the day’s strength to trepidation over the upcoming banking earnings. A poor showing could mean that safe haven buying will come back into full swing.
A void in economic news and the long holiday weekend left trading volume painfully light. As the day session was coming to a close, the ZB had only traded 78,000 contracts on the day. This is about half of what it might on a relatively light day.
Treasury traders seem to have forgotten about the currency markets, which are suggesting that the U.S. dollar could trade back to 83 in the near future. If this is the case, there should be some underlying pressure on bonds and notes.

Commitment of traders data reveals that open interest in the long bond has dropped off considerably. However, it also tells the story of a speculative community that remains net short. This isn’t a surprise as this has consistently been the case for years. What is a significant is that it appears as though many of the small speculators, and some of the large, have simply “given up” on higher interest rates or maybe the bond market altogether. This could be a sign that there is some room to move on the downside. It may sound cynical, but markets usually do the opposite of what most expect. Also, they have a tendency to wear traders down before making a move.
Despite today’s bounce, I continue to lean lower. However, the T-bond must hold resistance at 128’03 and the note must continue to close below 123’10.
April 13 T-Bond
April 13 T-note
Treasury Bond and Note Option Trading Recommendations
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Treasury Bond and Note Futures Trading Recommendations
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Eurodollar Futures Trading Recommendations
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Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
Local : 702-947-0701
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
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