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The Treasury market remains mostly positive on the charts from the overnight action, as ongoing weakness in Asian equity markets leaves the Euro zone debt crisis on center stage. While the market will see initial and ongoing claims today, we suspect that the market will either ignore data that depicts growth, or it will embrace and rally off the data that shows further evidence of slowing. In other words, the bias is up and it could take some really surprising headline type development to alter the upward track.
Overnight a Chinese economist suggested that China needed to ask the US for special bonds that cushion the Chinese against currency risk or bonds that are cushioned against inflation. With the Chinese steadfastly avoiding a distinct appreciation in their currency, it is possible that they would very much like to see a non currency impacted instrument tailored especially for them. Since the market has already seen requests from China for more TIPS, the desire to insulate their holdings from inflation isn’t a totally new demand. Ordinarily, seeing any change in the flow of Chinese demand for US Treasuries is seen as a negative to prices but in the current condition, the flight to quality bid remains so solid that prices have seen almost no reaction to the latest diversification news.
While the US will announce the size of next week’s auction later today, that news isn’t expected to dent sentiment either as the size is expected to drop a bit, but overall the total auction supply is expected to remain rather lofty. Critical close-in support is seen at 122-22 in June bonds, with a similar support point seen at 122-04 in September Bonds. In June Notes, close-in support is seen at 120-03, with similar support today in September Notes seen at 119-04. As for the upside, we doubt that the market will make a full return to the May highs today, but we do think that is in the cards in the coming trading sessions. However, in the event that a national strike in Greece turns violent that could set the stage for a rise back to the May highs. EU officials have again suggested overnight, that the markets are overreacting to the EU crisis, but so far the US Treasuries think that a large measure of uncertainty and anxiety needs to remain in place, regardless of short sale bans and other artificial limitations on markets.
As further confirmation of the bull tilt in Treasuries, one can make note of the lack of downside action in the wake of positive economic news recently and also the lack of downside in Treasury prices in the face of recovery attempts in the US equity markets. In fact, this market probably wouldn’t show any downside action in the face of news that the auction tally for this next week comes in above the prior week. More than likely confidence readings this morning will favor the bull camp.
Bond Market Commentary – 2010.05.20
by Dave Hightower on May 20, 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!
The Treasury market remains mostly positive on the charts from the overnight action, as ongoing weakness in Asian equity markets leaves the Euro zone debt crisis on center stage. While the market will see initial and ongoing claims today, we suspect that the market will either ignore data that depicts growth, or it will embrace and rally off the data that shows further evidence of slowing. In other words, the bias is up and it could take some really surprising headline type development to alter the upward track.
Overnight a Chinese economist suggested that China needed to ask the US for special bonds that cushion the Chinese against currency risk or bonds that are cushioned against inflation. With the Chinese steadfastly avoiding a distinct appreciation in their currency, it is possible that they would very much like to see a non currency impacted instrument tailored especially for them. Since the market has already seen requests from China for more TIPS, the desire to insulate their holdings from inflation isn’t a totally new demand. Ordinarily, seeing any change in the flow of Chinese demand for US Treasuries is seen as a negative to prices but in the current condition, the flight to quality bid remains so solid that prices have seen almost no reaction to the latest diversification news.
While the US will announce the size of next week’s auction later today, that news isn’t expected to dent sentiment either as the size is expected to drop a bit, but overall the total auction supply is expected to remain rather lofty. Critical close-in support is seen at 122-22 in June bonds, with a similar support point seen at 122-04 in September Bonds. In June Notes, close-in support is seen at 120-03, with similar support today in September Notes seen at 119-04. As for the upside, we doubt that the market will make a full return to the May highs today, but we do think that is in the cards in the coming trading sessions. However, in the event that a national strike in Greece turns violent that could set the stage for a rise back to the May highs. EU officials have again suggested overnight, that the markets are overreacting to the EU crisis, but so far the US Treasuries think that a large measure of uncertainty and anxiety needs to remain in place, regardless of short sale bans and other artificial limitations on markets.
As further confirmation of the bull tilt in Treasuries, one can make note of the lack of downside action in the wake of positive economic news recently and also the lack of downside in Treasury prices in the face of recovery attempts in the US equity markets. In fact, this market probably wouldn’t show any downside action in the face of news that the auction tally for this next week comes in above the prior week. More than likely confidence readings this morning will favor the bull camp.
Tags: Bonds, Financials, Interest Rates, Notes
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