Low yields don't seem to be a concern for investors as the government's auction of historically large amounts of debt continue to be met with strong demand. The Treasury issued $21 billion in re-opened 10-year notes to a draw of 3.735% and a bid to cover of 3.45. The indirect bidder participation was a bit low relative to much of 2009 but better than the previous two at 35.1%. Remember, indirect bidders are believed to primarily be foreign central banks. Tomorrow the Treasury will auction $13 billion in 30-year bonds and a moderate success could keep a floor under pricing.
As weak as the market looks, the risk seems to be to the upside. A rollover in equities could shake up what has been a quiet market and this could lead to a surprisingly quick and large wave of short covering. On the other hand, if stocks continue to grind higher the Treasury complex will certainly trade back to the lower end of its rage. We prefer the sidelines for now but are leaning toward the first scenario.
As we mentioned yesterday, if you are a short option trader you would likely be best off on the sidelines. Volatility has shrunk and the odds favor a spike in price action and premium. Sorry...I know that it is boring.
Nothing has changed...yesterday's outlook is still in play:
In the meantime, a close above 116'12 in the 30-year bond is slightly bullish but we certainly wouldn't bet the farm on it...or even a fun size Snickers. If stocks turn over, on the other hand, we will be looking for the June bond to see 118'05 in the coming sessions.
* 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
As weak as the market looks, the risk seems to be to the upside. A rollover in equities could shake up what has been a quiet market and this could lead to a surprisingly quick and large wave of short covering. On the other hand, if stocks continue to grind higher the Treasury complex will certainly trade back to the lower end of its rage. We prefer the sidelines for now but are leaning toward the first scenario.
As we mentioned yesterday, if you are a short option trader you would likely be best off on the sidelines. Volatility has shrunk and the odds favor a spike in price action and premium. Sorry...I know that it is boring.
Nothing has changed...yesterday's outlook is still in play:
In the meantime, a close above 116'12 in the 30-year bond is slightly bullish but we certainly wouldn't bet the farm on it...or even a fun size Snickers. If stocks turn over, on the other hand, we will be looking for the June bond to see 118'05 in the coming sessions.
* 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
