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The Treasury market has generally managed a weak upward bias on the charts and in the process the charts are presenting a pattern of higher lows. However, the June bond contract does seem to have paused just under the even number 130-00 level over the prior two trading sessions, and that pause has taken place despite the news that the Fed has become a periodic outright buyer. With a mortgage survey and a private employment estimate due out early this morning and that information followed by Pending Home sales, Construction Spending and the ISM report, there will be plenty of standard economic news items impacting prices today. However, some estimates are calling for a minor rise in pending home sales data and that could end up trumping the rest of the data, as the Treasury market really hasn’t been able to garner much of a benefit from weak data. Nonetheless the bull camp would seem to have a slight edge into the opening today, because of the initial weakness in the equity market and also because of the sheer amount of scheduled economic data flow today. In fact, we suspect that the mortgage application data could show some influence from the recent refinancing wave and that could apply a slight amount of early pressure to prices before the private jobs survey provides some support. With the prior official monthly US Non Farm payroll reading showing a loss of 651,000 jobs, seeing the ADP readings predict an even bigger loss of jobs in the March report should serve to underpin Treasury prices somewhat. However, with the Treasury market still capable of seeing evidence of slowing as a sign that the US government will continue to borrow aggressively, there is always the chance that weak data will be spun into a negative for prices. However, given that supply side concerns have been temporarily tamped down (which is really surprising considering that the TARP balance has supposedly declined to just $109 billion) that could mean that a weak muted rally might be in the cards today. Since the June Notes don’t appear to have a close-in psychological even number resistance hanging level over the market like bonds, it is possible that June Notes might be able to climb up to 124-12 at some point during the trade today. If the June bonds are able to pierce the 130-00 level (we assume the data will make that happen early today) they might be able to climb up to the next critical resistance zone on the charts up at 130-12. In fact, with news of a decent UK Guilt auction this morning, perhaps the view toward government securities is improved slightly. However, there is also talk that the G20 might come out with a quick global stimulus announcement and that event if it were to surface, could actually serve to lift US Treasuries, as the Treasury market might come to the conclusion, that the US won’t have to do as much heavy lifting to get the global economy back on track. A weak upward bias is expected in the wake of the data and because of the monthly non-farm payroll report looming on Friday morning.
