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Apparently Treasury prices were lifted late Wednesday in the face of some initial weakness in global equity prices, but it is possible that prices might have been lifted by early reports of yet another earthquake ( centered in Taiwan). Clearly Treasuries were lifted in the wake of the Fed Beige book yesterday perhaps because the Fed merely acknowledged the impact of severe February weather on the numbers and that theme has been offered up as an impact on the Friday numbers. However, the Fed Beige Book also noted growth across most Fed sections even though they made note of the weather impact. With the additional commentary that “layoffs slowed” and that hiring plans were anemic, that probably signaled to the market that the US jobs sector remains weak and with the key monthly reading just ahead, that prompted the Treasury market to recover and perhaps to see some fresh outright buying for a speculative play on the Friday payroll reports. We also think that renewed talk about the “Volcker Rule” rekindles some concern that Treasuries might once again be one of the few investments available to Banks. It also seems as if the Greece situation is mostly under control overnight, as that country launched a debt offering today and the results early on seemed to be mostly OK and that could serve to drain some flight to quality buying interest from the Treasury market.
In looking ahead to the scheduled data flow today, the markets will see a very active flow of data, with the weekly claims data, Pending Home sales and Factory orders. There is also a US Productivity reading to be released today and we suspect that will be supportive to Treasuries, as the job market remains soft enough, that employers are continuing to squeeze out production from an aggressively trimmed work force. However, until there is a higher degree of uncertainty on the hike/no hike question, the Productivity reading shouldn’t be seen as an overly important reading. In the other reports, the trade seems to be expecting a modest gain in Factory Orders and also in Pending Home sales and that could be limiting for Treasury prices, but only if the claims data, released ahead of the second set of data, manages to show some declines.
In conclusion, we think that the claims data will be the most important data of the day, with the Pending Home sales report, the report that might be capable of providing the biggest surprise. Therefore, we think that the upside will remain limited by the data today, with the June bonds potentially finding it difficult to rise above 117-17 and Notes above the 117-18 level. In fact, if the claims data shows the type of declines predicted by some economists, the Treasury market could see a mostly bearish track throughout the morning trading session. We suspect that ranges might be narrowed later today due to the US Non Farm payroll report on Friday morning, unless of course the stock market takes out the Tuesday lows off some fresh disconcerting development.
Bond Market Commentary – 2010.03.04
by Dave Hightower on March 4, 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!
Apparently Treasury prices were lifted late Wednesday in the face of some initial weakness in global equity prices, but it is possible that prices might have been lifted by early reports of yet another earthquake ( centered in Taiwan). Clearly Treasuries were lifted in the wake of the Fed Beige book yesterday perhaps because the Fed merely acknowledged the impact of severe February weather on the numbers and that theme has been offered up as an impact on the Friday numbers. However, the Fed Beige Book also noted growth across most Fed sections even though they made note of the weather impact. With the additional commentary that “layoffs slowed” and that hiring plans were anemic, that probably signaled to the market that the US jobs sector remains weak and with the key monthly reading just ahead, that prompted the Treasury market to recover and perhaps to see some fresh outright buying for a speculative play on the Friday payroll reports. We also think that renewed talk about the “Volcker Rule” rekindles some concern that Treasuries might once again be one of the few investments available to Banks. It also seems as if the Greece situation is mostly under control overnight, as that country launched a debt offering today and the results early on seemed to be mostly OK and that could serve to drain some flight to quality buying interest from the Treasury market.
In looking ahead to the scheduled data flow today, the markets will see a very active flow of data, with the weekly claims data, Pending Home sales and Factory orders. There is also a US Productivity reading to be released today and we suspect that will be supportive to Treasuries, as the job market remains soft enough, that employers are continuing to squeeze out production from an aggressively trimmed work force. However, until there is a higher degree of uncertainty on the hike/no hike question, the Productivity reading shouldn’t be seen as an overly important reading. In the other reports, the trade seems to be expecting a modest gain in Factory Orders and also in Pending Home sales and that could be limiting for Treasury prices, but only if the claims data, released ahead of the second set of data, manages to show some declines.
In conclusion, we think that the claims data will be the most important data of the day, with the Pending Home sales report, the report that might be capable of providing the biggest surprise. Therefore, we think that the upside will remain limited by the data today, with the June bonds potentially finding it difficult to rise above 117-17 and Notes above the 117-18 level. In fact, if the claims data shows the type of declines predicted by some economists, the Treasury market could see a mostly bearish track throughout the morning trading session. We suspect that ranges might be narrowed later today due to the US Non Farm payroll report on Friday morning, unless of course the stock market takes out the Tuesday lows off some fresh disconcerting development.
Tags: Bonds, Financials, Interest Rates, Notes
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