Yield’s Reluctantly Moving Higher

Despite relatively large intraday swings, bonds and notes ended the day nearly where they began. Treasuries were under pressure for much of the day but the Fed’s Beige book reminded the market of the troubles still facing the economy. Similarly, the equities weakened slightly following the Fed’s interpretation of the economy and this likely helped the Treasury bid.
The Fed’s Beige Book was somewhat optimistic in that although it wasn’t positive, it did suggest improvement. For example, retails sales were noted to be “flat” but that is better than what we have been seeing.
The 10-year note auction went relatively well, but it takes a lot to impress this market. The Treasury re-opened $20 billion in 10-year notes at a rate of 3.510% and a 2.77 bid to cover.
The real story in recent days has been the U.S. dollar which has suffered considerable losses. After being range-bound for what seemed like an eternity, the dollar index finally. In our client newsletter, we pointed out seasonal tendencies for the Euro to rally and the dollar index (comprised 60% of the Euro) often struggles in early September. However, we also stated that we think that following a dip to the mid-76’s may be a longer-term opportunity for the bulls. Today’s lows in the greenback are approaching our target. We may not have seen the absolute intermediate-term low in the dollar index quite yet, but we think that we are getting near. Eventually this could work in favor of bonds and notes.
Treasuries seem to be breaking all of the rules…or at least they are breaking our rules. The 30-year bond broke through our critical pivot near 118’15 but failure of the 10-year note to follow, along with the late day recovery leaves us on the fence. Perhaps in the next few days, things will clear up enough to get a grasp on where the market goes from here. In the meantime, we will look for a bullish opportunity in the long bond near 116 but still plan on being bears in above 121.
The note, on the other hand, has managed to maintain its bullish bias and still looks like it is destined for the mid-118’s in the December futures contract.
Our idea to be a seller in the 5-year note near 116 turned out to be a good one, but we think that the market could be headed for 116’08ish from here.

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*Seasonality is already be factored into current prices, any references to such does not indicate future market action.
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.
Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.
June 29 – Our clients were recommended to sell September Eurodollar futures while buying a 9937.5 call as insurance. The calls were getting filled near 7 ticks, and the futures near 9933. This makes the total risk on the trade at expiration $287.50 before commissions and fees.
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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