The session started off with an overly negative tone, but it didn't last long. The lack of economic news paved the way for a Bernanke taking the stage in the bond pit. His views of tame inflation for the foreseeable future prompted bond and note buying to push the futures market to our upside target in the long bond.
The buying spree was aided by Fed buying in the 2016 and 2019 maturities; the central bank purchased $7.0 billion of the $18.502 that dealers were looking to unload. On a percentage basis, this was a much more aggressive purchase as has been seen in the past. This comes after last weeks' message from the Fed in which it appeared that the quantitative easing policy had a limited and minimal life span. If you recall, the minutes of the most recent meeting suggests that most Fed members doubt that the purchase of the Treasuries own securities would have little impact on long-term interest rates.
The volume was noted as being lackluster, and may have been exaggerated by the running of buy stops. However, it is difficult to deny the bullish tilt. We remain overall bullish. In fact, we think that a close over 118'15 in the coming session will lay the ground work for another retest of the recent highs near 121 and possibly even the mid 123's within the next month or so if the equity rally fails.
Keep in mind that the seasonal tendency for bonds and notes points higher throughout the remainder of July. Come August, the market tends to see an even more bullish tone. Of course, seasonals aren't fool proof but I wouldn't be willing to bet against them often.
If you are following yesterday's recommendation to sell puts against the 30-year bond, we like the idea of taking a quick profit. The 109's could have been sold yesterday for about 23 ticks and bought back today for about 9.
In yesterday's newsletter, we mentioned the next meaningful resistance in the 30 year to be in the mid-115's which happened to be the highs of the session. This leaves us relatively neutral in the next day or two but it seems as though a close above 115'15 could mean a continued rally.
We also mentioned that a close above 117 in the 10-year note may lead to 119, and it seems that the market is well on its way.
**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.
July 20 - We recommended to sell the August 109 puts for about 23 ticks
• July 21 - We recommended to buy back the August 109's for about 8 ticks, a fill at 9 was possible today.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Flat
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.
The buying spree was aided by Fed buying in the 2016 and 2019 maturities; the central bank purchased $7.0 billion of the $18.502 that dealers were looking to unload. On a percentage basis, this was a much more aggressive purchase as has been seen in the past. This comes after last weeks' message from the Fed in which it appeared that the quantitative easing policy had a limited and minimal life span. If you recall, the minutes of the most recent meeting suggests that most Fed members doubt that the purchase of the Treasuries own securities would have little impact on long-term interest rates.
The volume was noted as being lackluster, and may have been exaggerated by the running of buy stops. However, it is difficult to deny the bullish tilt. We remain overall bullish. In fact, we think that a close over 118'15 in the coming session will lay the ground work for another retest of the recent highs near 121 and possibly even the mid 123's within the next month or so if the equity rally fails.
Keep in mind that the seasonal tendency for bonds and notes points higher throughout the remainder of July. Come August, the market tends to see an even more bullish tone. Of course, seasonals aren't fool proof but I wouldn't be willing to bet against them often.
If you are following yesterday's recommendation to sell puts against the 30-year bond, we like the idea of taking a quick profit. The 109's could have been sold yesterday for about 23 ticks and bought back today for about 9.
In yesterday's newsletter, we mentioned the next meaningful resistance in the 30 year to be in the mid-115's which happened to be the highs of the session. This leaves us relatively neutral in the next day or two but it seems as though a close above 115'15 could mean a continued rally.
We also mentioned that a close above 117 in the 10-year note may lead to 119, and it seems that the market is well on its way.
**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.
July 20 - We recommended to sell the August 109 puts for about 23 ticks
• July 21 - We recommended to buy back the August 109's for about 8 ticks, a fill at 9 was possible today.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Flat
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.
