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COMMODITY TRADING SCHOOL US TREASURY FUTURES REPORT 06/23/09

ECONOMIC DATA 06/24/09: all times EST

  • 8:30 AM US DURABLE GOODS (-0.5%)
  • 10:00 AM US NEW HOME SALES (365K)
  • 10:35 AM EIA INVENTORY (CRUDE, PRODUCTS)
  • 1:00 PM US 5 YEAR NOTE AUCTION ($37 B)

EXISTING HOME SALES (4.77M VS.4.85 M),

US 2 YEAR NOTE AUCTION ($40B Bid to Cover 3.19, YIELD 1.152% VS. 1.202% EXP)

US TREASURIES RALLY FOR ANOTHER SESSION, SPIKING HIGHER AFTER US 2 YEAR NOTE AUCTION POSTS BEST RESULTS SINCE 2007.

US TREASURIES gained for a third session as economic uncertainty continues to erode notions that the Federal Reserve will adopt a hawkish stance by raising interest rates. Surprisingly strong results from the $40 billion of US 2 year note auctions helped most of the fixed income complex move higher through initial resistance levels. Today’s auction drew the most bids for a two year note sale since September 2007. Bid to cover was an extraordinarily high 3.19, easily surpassing the recent record of 2.94. The majority of strong bids were initiated by indirect bidders (those outside of the primary dealers). The category includes foreign central banks and purchased nearly 70% of the issued notes today.

Treasury yields have fallen significantly in the last week as market perceptions suggest that the euphoria of global recovery has likely gotten ahead of itself. These concerns have extended beyond equity speculation as the price of credit default swaps (instruments used to hedge against corporate bond defaults) has risen to their highest levels in nearly a month. Negative sentiment is being fueled by reports that General Motors is expected to miss a $250 million bond payment. While small in comparison to the overall market, it does shine a light on the sector and potential for a second round of default concerns, which could pressure the sector which has received so much support and capital since the market bottom in March.

Wednesday’s session should offer another round of volatility as the markets will contend with the notion of recent gains already being priced into the FOMC holding current rate policy longer than previously expected. The wildcard for market direction will come from the results of the abnormally high amounts of US 5 and 7 year notes. If the results offer a proportionally higher bid to cover than today’s shorter yields, expect a possible step higher to test the 119-00 level in the US 30 years. Stay tuned.

TECHNICAL OUTLOOK-US 30 YEARS- US 30 years powered through initial resistance level of 116-250, closing above 117-00 for the first time this month. Market faces a significant test to upside momentum at 117-280. A failure at 117-220 should set the market up for a pullback to 116-170.

US 10 YEARS- Market has some further upside recovery potential. Look for resistance to set up at 115-250. From this level, market should pullback to 114-260

.

EURODOLLARS- December Eurodollars pushed through resistance at 9902.0, and appear to be setting up to challenge 9909.0. Should this resistance level hold, market should pullback to 9889.0

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US U9 (US 30 YRS)

116-105

117-145

115-260

117-065

+27/32nds

TY U9 (US 10 YRS)

115-070

115-190

114-270

115-155

+11/32nds

ED Z9 (EURO $)

9900.5

9906.0

9897.0

9906.0

+5.5

Prepared by Rich Roscelli & Paul Brittain.

EMAIL QUESTIONS OR COMMENTS TO RICH@BINVSTGRP.COM

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. Whitehall Investment Management, 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.