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The Treasury market remains near the upside breakout point on the charts this morning, despite the fact that US equities have effectively rejected a downside breakout seen last Friday morning. However, with the German DAX opening higher and the US equity markets also showing positive action early today that could have undermined Treasuries and in turn knocked them back away from the upside breakout point on the charts. However, we suspect that the market is still pent up for a continuation of weak scheduled US data as that has been the pattern for well over a month. Apparently the weekend G20 yielded little in the way of significant developments and that should make the US data a little more important this morning. We suspect that the Personal Income reading will be the main focal point from the Data flow, with Personal Spending and the PCE core Index monthly readings also critical news. However, the PCE Index reading probably won’t show inflation, it is likely to show deflation and that is why that reading could surprise the Treasury trade this morning.
It is probably a little early for the trade to begin considering the week ending US Non farm monthly payroll reading but in the event that today’s rather active flow of data is generally weak, that could turn the focus of the market back toward economics.
The Commitments of Traders Futures and Options report as of June 22nd for U.S. Treasury Bonds showed that Non-Commercial and Non-reportable combined traders held a net short position of 30,549 contracts, with the Note market showing its Non-Commercial and Non-reportable combined traders holding a combined net short position of 157,031 contracts. While the Bond and note position readings are probably understated, due to the rally forged since early last week, the data appears to show that the Treasury market still has technical short covering capacity.
We think the data this morning will either underpin the Treasury market, or begin lifting it back toward the late May highs, as we think the economy is slow enough to prompt Washington to act with additional stimulus measures. In fact, Obama would probably have went along with the G20 “company line” of reducing deficits this weekend, if he wasn’t aware of the slowing pace of the US economy and the need for incumbents to get the economy moving well ahead of the upcoming elections.
We see the market respecting fairly close-in support around the 125-11 level in September Bonds and at 121-15 in September Notes. As for resistance, we suspect that 126-00 will be very weak resistance in September bonds, with the next resistance level seen at the old high of 126-05. Similarly, September Notes have initial resistance at 121-25 this morning. We suspect that Treasuries will see new highs sometime this week.
Interest Rate Market Commentary – 2010.06.28
by Dave Hightower on June 28, 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 near the upside breakout point on the charts this morning, despite the fact that US equities have effectively rejected a downside breakout seen last Friday morning. However, with the German DAX opening higher and the US equity markets also showing positive action early today that could have undermined Treasuries and in turn knocked them back away from the upside breakout point on the charts. However, we suspect that the market is still pent up for a continuation of weak scheduled US data as that has been the pattern for well over a month. Apparently the weekend G20 yielded little in the way of significant developments and that should make the US data a little more important this morning. We suspect that the Personal Income reading will be the main focal point from the Data flow, with Personal Spending and the PCE core Index monthly readings also critical news. However, the PCE Index reading probably won’t show inflation, it is likely to show deflation and that is why that reading could surprise the Treasury trade this morning.
It is probably a little early for the trade to begin considering the week ending US Non farm monthly payroll reading but in the event that today’s rather active flow of data is generally weak, that could turn the focus of the market back toward economics.
The Commitments of Traders Futures and Options report as of June 22nd for U.S. Treasury Bonds showed that Non-Commercial and Non-reportable combined traders held a net short position of 30,549 contracts, with the Note market showing its Non-Commercial and Non-reportable combined traders holding a combined net short position of 157,031 contracts. While the Bond and note position readings are probably understated, due to the rally forged since early last week, the data appears to show that the Treasury market still has technical short covering capacity.
We think the data this morning will either underpin the Treasury market, or begin lifting it back toward the late May highs, as we think the economy is slow enough to prompt Washington to act with additional stimulus measures. In fact, Obama would probably have went along with the G20 “company line” of reducing deficits this weekend, if he wasn’t aware of the slowing pace of the US economy and the need for incumbents to get the economy moving well ahead of the upcoming elections.
We see the market respecting fairly close-in support around the 125-11 level in September Bonds and at 121-15 in September Notes. As for resistance, we suspect that 126-00 will be very weak resistance in September bonds, with the next resistance level seen at the old high of 126-05. Similarly, September Notes have initial resistance at 121-25 this morning. We suspect that Treasuries will see new highs sometime this week.
Tags: Bonds, Interest Rates, Notes
About Dave Hightower