Rates Stabilize

Interest rate products stabilized on Tuesday allowing the market to digest yesterday’s swift sell-off. We warned you last week that this would be a slow news week…and it has been. The only guidance that Treasury traders seem to be relying on is the direction of equity trade. Unfortunately, thin stock volume has resulted in yesterday’s questionably relentless rally and today’s refusal to correct. While we have been bullish the S&P since the index made its low in the 870’s we were a little surprised at the magnitude of the rally. That said, we still believe that the S&P will make its way higher, approximately to the 940 area; if this is an accurate assumption, Treasuries should find themselves retesting the May lows and slightly beyond.
Keeping bonds and notes under pressure are assumptions that the U.S. economy is showing signs of recovery. The newest evidence supporting this theory is a statement made by Gary Stern, President of the Minneapolis Fed;

“As we get into the middle of 2010 and beyond, I would expect to see a resumption of healthy growth.” He also downplayed the role of deflation, “To date, there is scant evidence of deflation in so-called core measures of inflation.” He added, “If economic growth resumes in the United States as I expect, the threat of deflation should diminish commensurately.”

Additionally, while the Fed has taken a breather when it comes to note issuance, corporations have not. Barclays is looking to sell at least $500 million in non-guaranteed 10-year notes and Verizon issued nearly $4 billion in various 2-year instruments.
We are going to stick with our original call for now…We think that the T-bond could see 119’08 and maybe even the mid’118’s before finding buyers. Note traders should look for support near 119’11 and again at 119. The first area of support for the 5-year note futures looks to be near 116’21 with 116’01 being significant support.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
May 7th – Sell the June 117 puts for 25 or better
ยท May 11 – This trade was exited near 10 to 12 ticks to take a quick profit
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.
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.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.


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