Bond and notes moved higher in early trade as equities struggled. After two consecutively strong Treasury auctions, and questionable fundamentals in overseas fixed income markets, the traders were anticipating strong demand for the 30-year.
Lofty expectations seemed to have just set the market up for failure. In post-auction trade, the long end of the curve dipped well into negative territory. The $16 billion issue of bonds went off at a higher than expected rate of 4.49%, a bid to cover of 2.6 and an indirect bidder take of 32.5%. Nonetheless, the selling was temporary and Treasuries migrated back to unchanged.
In economic news, weekly jobless claims were slightly worse than expected. However, the week’s most notable data will be released tomorrow. We will start off the day with retail sales and then a little later in the morning we will have the Michigan Sentiment index and business inventories to digest.
Not much has changed, so we are holding with yesterday’s commentary:
Based on action in other markets, we believe that the June T-Bond futures “should” have traded down to 119. This is a bit discouraging, but we are still looking for about 118’23 in the coming sessions. This would equate to about 118 in the June T-Note futures. Good luck!
That said, we expect low volume tomorrow and a counter-trend move is possible. If you are sitting on open profits, you might want to lighten up or even flatten out…especially if we see early morning weakness.
* 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. Charts provided by Track ‘n Trade, Gecko software.
**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.
April 22 – Our clients were advised to sell the July bond 121 calls for 22 or better, and were filled this morning on the rally.
May 7 – Clients were recommended to buy back the July 121 calls and sell the July 124 calls instead. The swap was done at a debit of 1’20 and left some money on the table but the goal must be capital preservation at this point.
May 10 – Clients were advised to sell the July 115 put for 36 or better
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Senior Analyst / Commodity Broker
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.