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 comes into the last trading day of the week sitting within close proximity to the top of the last months trading range. Apparently the sweep of very weak US economic data this week has become the driving force in the Treasury markets, as the European debt story has been somewhat quiet this week. In fact, economic news from the Euro zone overnight might be applying some minor pressure to Treasury prices early this morning, as April Italian Industrial Production was up rather impressively and the May German PPI report also showed a minor gain. However, in looking back to the US data flow this week, it will be difficult to discount the fear of slowing. In fact, the list of weaker than expected readings was expansive this week, with sharply lower Housing starts and permits, a jump in initial claims and the lowest Philly Fed manufacturing survey reading in 10 months. One might even suggest that Treasuries have clawed back to within 2 points of their highs, without the distinct assistance of fresh headline concerns from the Euro zone.
Surprisingly the flow of weaker US economic readings this week hasn’t undermine US equity prices yet, as sharp declines in equities can sometimes make the economic outlook feel even worse. Since there are no scheduled US data points today, that could take some of the upward bias out of Treasury prices, but seeing UK Borrowing for May come in below expectations, could provide a measure of support from the flight to quality angle once again.
In retrospect, the Treasury market appears to have forged a pretty strong set of consolidation lows around this week’s lows, and to take prices down consistently from current levels, is probably going to require a lot of very favorable economic data and apparently an even longer period of time without concerning Euro zone debt headlines. However, initial support today is pegged at 124-00 in the September bonds, with similar support in September Notes seen at 120-14.
As for the upside the market might not have the momentum today, to forge a new high for the week, which means that yesterday’s highs of 124-18 in September Bonds and 120-27 in September Notes could be effective resistance today. Even news that the US would sell $108 billion in supply next week, failed to undermine Treasuries and that suggests the buyers continue to outnumber the sellers by a decent margin. The lack of scheduled US data today, probably makes the direction of the equity markets, the primary driving force for Treasury prices.
