Treasuries Waffle Ahead of Data

A surprise drop in consumer confidence reversed early morning weakness in Treasuries but the bulls struggled to keep momentum. While the recent trend has been higher, bonds and notes face significant resistance.
According to the Conference Board, their confidence index fell to 53.1 in September after posting 54.5 in August. Analysts were expecting an increase to 57. Consumer confidence levels are near the worst levels since the early 1990’s. The negative news from the Conference Board overshadowed a better than anticipated Case-Shiller Housing index. According to the index, July marked the 6th consecutive increase in home prices.
Event risk remains elevated throughout the week, so it seems reasonable to expect an increased amount of volatility and fickle trade. We tend to believe that the Treasury market will be finding a relatively meaningful high in the coming week or weeks. The seasonal tendency in this market is for a downturn in early October that lasts approximately three weeks.
Thus far our primary resistance areas of 121’27 in the long bond and the mid 118’s in the note, have held. While we prefer the downside, we still acknowledge that there is risk of a spike to 123ish in the 30-year bond and 120 in the note.
Our clients were recommended to sell the December 129 calls for about 20 ticks, but it just wasn’t meant to be. The high of the day was 19 and some even tried to adjust the price a bit lower but weren’t able to get a fill. We will be working the same order tomorrow but it may be necessary to adjust strike price and premium.
Of course, it is possible to get much more aggressive with this. One idea would be to sell a much closer strike price and another would be to use the proceeds of a short call to purchase a long put.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
Treasury Bond and Note 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.