A weaker dollar and rallying equities weren't enough to put a cap on bond and note buying. A better than expected auction of 30 year bonds along with an overall bullish bias on the day resulted in a two handle rally. The pace of the reversal likely caught many bears on the wrong side of trade and the squeeze had little mercy.
It is a little unusual to see stocks and bonds moving in tandem but that is exactly what we are seeing. Impressive demand for the $12 billion in reopened 30 year bond issues gave Treasury bulls confidence in near-term demand for the securities. Likewise, it gave stock traders some hope in the Fed's ability to finance its massive balance sheet. The auction went off at 4.238% but the futures market brought the yield well under 4.20% by the day's end.
The greenback continues to struggle but Treasury traders aren't paying attention. The U.S. dollar index is trading at its lowest level in a year but it hasn't really weighed on interest rate products as it should. This either signals underlying strength or is simply the result of holiday trade and a fickle market.
Even more surprising was the interest rate market's snub of Treasury Secretary Geithner's pledge of a recovery and the resulting bank repayment of rescue funds. However, the market focused on the negative comments and overlooked the positive (this is in contrast to the equity market interpretation of the same information).
We feel as though bonds and notes have some room to move on the upside but today's move was a bit irrational and the seasonal top is looming. Look for resistance in the December 30-year near 122 with the possibility of a move to 124. Notes seem to be on their way to 118'5 but could see the closer to 121 should things get "out of hand". We like being bearish this market at noted levels. Stay tuned for details.
* 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.
Flat
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.
It is a little unusual to see stocks and bonds moving in tandem but that is exactly what we are seeing. Impressive demand for the $12 billion in reopened 30 year bond issues gave Treasury bulls confidence in near-term demand for the securities. Likewise, it gave stock traders some hope in the Fed's ability to finance its massive balance sheet. The auction went off at 4.238% but the futures market brought the yield well under 4.20% by the day's end.
The greenback continues to struggle but Treasury traders aren't paying attention. The U.S. dollar index is trading at its lowest level in a year but it hasn't really weighed on interest rate products as it should. This either signals underlying strength or is simply the result of holiday trade and a fickle market.
Even more surprising was the interest rate market's snub of Treasury Secretary Geithner's pledge of a recovery and the resulting bank repayment of rescue funds. However, the market focused on the negative comments and overlooked the positive (this is in contrast to the equity market interpretation of the same information).
We feel as though bonds and notes have some room to move on the upside but today's move was a bit irrational and the seasonal top is looming. Look for resistance in the December 30-year near 122 with the possibility of a move to 124. Notes seem to be on their way to 118'5 but could see the closer to 121 should things get "out of hand". We like being bearish this market at noted levels. Stay tuned for details.
* 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.
Flat
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.
