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After forging a distinct rally attempt and managing to reach the highest level since December 18th yesterday, Treasury prices fell back and March bonds ended up finishing near a collection of closes around the 118-06 level. It must have been an interesting Fed meeting kick off yesterday with Congress wrangling over the confirmation of the Fed Chairman. Supposedly Bernanke has the Senate votes to be confirmed, with that vote expected to come on Thursday. However, members of Congress have to make up for their lack of attention to the beginning of the sub-prime crisis, by making a public scene and blaming Fed leadership. Too bad the FOMC isn’t allowed to re-confirm members of Congress and in the process they could grill the legislators on their efforts to grow Ginnie and Freddie into reckless out of control lending machines. In the end, Bernanke seems to have the support of the White House and enough of the Senate to be confirmed. While the Treasury Bonds saw a rally of roughly 9 ticks, with Notes only gaining 5 ticks in the wake of the first leg of US Treasury auctions on Tuesday, the market will be presented with another $42 billion in 5 Year note supply today and that promises to lend some minimal support to Treasury prices around mid session. With the US State of the Union speech anxiously awaited tonight, the Treasury market might be locked into a tighter than normal trading range, as there are hopes that the US will reign in spending, but there would also seem to be the need to provide even more stimulus spending! Just as an addict promises to quit after the next fix, the US will probably look for another jobs program or for a slimmed down health care reform package, or for a clean air program and then it will clean up its spending act. In the mean time, overnight equity prices showed periodic weakness and that seemed to be providing a bit of a flight to quality bid to bonds and notes this morning. In addition to a new Home sales report, that is expected to show a minor gain, the Treasury trade will also be confronted with testimony from Treasury Secretary Geithner on the AIG payments. While the hearings might not go that well for Geithner, we doubt that the testimony will serve to derail US Treasuries. Once again Congress will try to nit pick Geithner in hindsight for moves that were made under extreme pressure but we doubt that anything will happen beyond the Treasury Secretary losing some favor within the Obama Administration. In short, after some minor weakness, in the face of the New Homes sales figures and the AIG testimony, we suspect that Treasury prices will attempt to climb into and through the mid day auction results and then catch a slight additional bid into the FOMC statement release window at 1:15 cst. We have to think that the Fed is going to remain totally on hold, with little if any change in the statement, as the recent numbers have softened and noted weakness in equities has probably served to dent consumer and investor sentiment. Therefore, we would expect a slightly positive late morning and afternoon bias, but we also suspect that Treasury prices will find it difficult to move outside of this week’s trading range, until the market learns what other major institutions might be turned upside down by the governments ongoing overhaul addiction.
Bond Market Commentary – 2010.01.27
by Dave Hightower on January 27, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
After forging a distinct rally attempt and managing to reach the highest level since December 18th yesterday, Treasury prices fell back and March bonds ended up finishing near a collection of closes around the 118-06 level. It must have been an interesting Fed meeting kick off yesterday with Congress wrangling over the confirmation of the Fed Chairman. Supposedly Bernanke has the Senate votes to be confirmed, with that vote expected to come on Thursday. However, members of Congress have to make up for their lack of attention to the beginning of the sub-prime crisis, by making a public scene and blaming Fed leadership. Too bad the FOMC isn’t allowed to re-confirm members of Congress and in the process they could grill the legislators on their efforts to grow Ginnie and Freddie into reckless out of control lending machines. In the end, Bernanke seems to have the support of the White House and enough of the Senate to be confirmed. While the Treasury Bonds saw a rally of roughly 9 ticks, with Notes only gaining 5 ticks in the wake of the first leg of US Treasury auctions on Tuesday, the market will be presented with another $42 billion in 5 Year note supply today and that promises to lend some minimal support to Treasury prices around mid session. With the US State of the Union speech anxiously awaited tonight, the Treasury market might be locked into a tighter than normal trading range, as there are hopes that the US will reign in spending, but there would also seem to be the need to provide even more stimulus spending! Just as an addict promises to quit after the next fix, the US will probably look for another jobs program or for a slimmed down health care reform package, or for a clean air program and then it will clean up its spending act. In the mean time, overnight equity prices showed periodic weakness and that seemed to be providing a bit of a flight to quality bid to bonds and notes this morning. In addition to a new Home sales report, that is expected to show a minor gain, the Treasury trade will also be confronted with testimony from Treasury Secretary Geithner on the AIG payments. While the hearings might not go that well for Geithner, we doubt that the testimony will serve to derail US Treasuries. Once again Congress will try to nit pick Geithner in hindsight for moves that were made under extreme pressure but we doubt that anything will happen beyond the Treasury Secretary losing some favor within the Obama Administration. In short, after some minor weakness, in the face of the New Homes sales figures and the AIG testimony, we suspect that Treasury prices will attempt to climb into and through the mid day auction results and then catch a slight additional bid into the FOMC statement release window at 1:15 cst. We have to think that the Fed is going to remain totally on hold, with little if any change in the statement, as the recent numbers have softened and noted weakness in equities has probably served to dent consumer and investor sentiment. Therefore, we would expect a slightly positive late morning and afternoon bias, but we also suspect that Treasury prices will find it difficult to move outside of this week’s trading range, until the market learns what other major institutions might be turned upside down by the governments ongoing overhaul addiction.
Tags: Bonds, Financials, Interest Rates
About Dave Hightower