ALARON US TREASURY FUTURES REPORT 05/21/09
ECONOMIC DATA 05/22/09: all times EST
NO MAJOR ECONOMIC RELEASES. CHECK FOR EARLY CLOSES
SUMMARY OF DATA 05/21/09
US JOBLESS CLAIMS (631 K VS. 645K)
US LEADING INDICATORS (1.0%), PHILA FED SURVEY (-22.7 VS -20.0)
EIA NAT GAS INVENTORY (103 BCF INCREASE)
US 2, 5, 7 YEAR NOTE ANNOUNCEMENTS (2YR-$40B, 5 YR-$35B, 7YR-$26 B)
US TREASURIES COLLAPSE. SUPPLY CONCERNS BOLSTERED BY POTENTIAL FOR US CREDIT RATING TO BE DOWNGRADED.
US TREASURIES fell dramatically on Thursday as debt supply concerns reemerged and an S&P downgrade of government debt from the United Kingdom painted an ominous forecast for the credit worthiness of debt from the United States. Early pressure on the US yield curve came in when the Federal Reserve failed to purchase as much debt as expected. This lack of action spurred a reversal of Wednesday’s price spike fueled by the release of the April FOMC meeting minutes, which highlighted opinions by a number of Fed governors of the need for purchasing government assets. The perceived lack of Fed support for the Treasury markets was given additional highlight after the announcements for next week Treasury auction of US 2, 5, and 7 year notes. The auctions are the first to take place after a two week hiatus and once again acted as a major catalyst for ongoing concerns regarding the trillions of dollars of government securities that the marketplace is expected to absorb.
A disturbing hint of possible things to come also occurred today as S&P rating service downgraded the sovereign debt of the United Kingdom. S&P cited the concerns being driven by the close to 100% correlation between the nation’s GDP (Gross Domestic Product) and its national debt levels. Investors took notice and perceived that the AAA credit rating of the United States could also be in jeopardy, based on the tremendous outlays of debt and shrinking tax revenues facing the world’s largest economy. The combination of these elements caused a rush to the exits for long bond positions, disrupting the usual strategies of building positions of perceived security ahead of a long weekend in the United States. Of course, since it was mentioned this week that volatility has decreased in the overall markets, it immediately picks up (Murphy’s Law). Traders should be ready for some rebound in the markets as the governments try to defend against the challenge to the credit stability of their debt.
Technically, June 30 year futures reached the projected target of 120-200 a little sooner than expected. The break through this has set up a potentially oversold condition as read by a 60 min RSI. Look for a possible gap fill up to 121-05 initial resistance. A near term top should be found at 121-28. The downward trend remains in place, with the markets next down target of support at 118-235.
|
US DEBT FUTURES |
OPEN |
HIGH |
CLOSE |
CHANGE |
|
|
US M9 (US 30 YRS) |
122-160 |
123-100 |
119-315 |
120-105 |
-2.04/32nds |
|
TY M9 (US 10 YRS) |
120-300 |
121-110 |
119-210 |
119-295 |
-1.01/32nds |
Prepared by Rich Roscelli & Paul Brittain.
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. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. 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.
