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While yesterday’s US numbers weren’t that significant they continued to point to what appears to be a slackening US economy and that combined with a rather surprising drop in Canadian building permits date yesterday suggests that all of North America remains mired in a slow down of sorts. Certainly Treasury prices remain in favor, as a flight to quality instrument this morning, as the focus of the trade temporarily shifts back toward the Euro zone in the wake of a flurry of Press coverage on the bank stress tests. The Asian trade in Treasuries was slightly upbeat in the wake of indirect assurances that China wasn’t going to dump US Treasuries in an effort to exert pressure on the US.
Apparently Chinese officials indicated that US Treasuries would remain a key component of Chinese foreign currency controls. In the second quarter of this year, the Chinese reportedly held over $900 billion in US Treasuries, but when one considers the size of the Chinese reserve total of $2.45 trillion, the US holdings aren’t as egregious as many seem to think.
With a slack US economic report slate due out today, the focus of the Treasury market is likely to be on news surrounding the Euro zone bank stress tests, but since those result won’t be made public until February 23rd, the flurry of dialogue around the release of the criterion sent to the Euro banks, is likely to offer little in the way of major direction to US Treasuries and the US Dollar. In fact, with the Dollar showing a bit of strength today and the US equity market showing weakness that would seem to leave the bull camp in Treasuries with an edge to start the US trade today.
Overnight the Royal Bank of Australia indicated that Chinese and Indian economies remained strong and that the Australian economy was showing such strong demand that they would have to respond very soon, but apparently the bright spots in the global economy aren’t going to sway international equity markets, as they are showing a downward bias today.
In the mean time, US Treasuries look to remain within striking distance of their recent highs, with the flow of upcoming numbers potentially serving to lift prices back to their highs. We continue to think that Treasuries are going to be held back because of risk and reward fears associated with purchasing at such low historical yields. Critical support in September bonds is rather close-in at 127-28, with little in the way of resistance seen until the old high of 128-19. Initial support in September T-Notes is seen at 122-20, with little in the way of resistance seen until the old high of 123-01.
At least in the near term, the bull camp looks to retain the edge, as there is no scheduled data to fully alter sentiment and it doesn’t appear as if Washington is on the verge of launching a fresh stimulus effort. About the only way to quickly undermine Treasuries would be to see concerns toward the deficit take precedence over take the fears of slowing in the headlines.
Interest Rate Market Commentary – 2010.07.07
by Dave Hightower on July 7, 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!
While yesterday’s US numbers weren’t that significant they continued to point to what appears to be a slackening US economy and that combined with a rather surprising drop in Canadian building permits date yesterday suggests that all of North America remains mired in a slow down of sorts. Certainly Treasury prices remain in favor, as a flight to quality instrument this morning, as the focus of the trade temporarily shifts back toward the Euro zone in the wake of a flurry of Press coverage on the bank stress tests. The Asian trade in Treasuries was slightly upbeat in the wake of indirect assurances that China wasn’t going to dump US Treasuries in an effort to exert pressure on the US.
Apparently Chinese officials indicated that US Treasuries would remain a key component of Chinese foreign currency controls. In the second quarter of this year, the Chinese reportedly held over $900 billion in US Treasuries, but when one considers the size of the Chinese reserve total of $2.45 trillion, the US holdings aren’t as egregious as many seem to think.
With a slack US economic report slate due out today, the focus of the Treasury market is likely to be on news surrounding the Euro zone bank stress tests, but since those result won’t be made public until February 23rd, the flurry of dialogue around the release of the criterion sent to the Euro banks, is likely to offer little in the way of major direction to US Treasuries and the US Dollar. In fact, with the Dollar showing a bit of strength today and the US equity market showing weakness that would seem to leave the bull camp in Treasuries with an edge to start the US trade today.
Overnight the Royal Bank of Australia indicated that Chinese and Indian economies remained strong and that the Australian economy was showing such strong demand that they would have to respond very soon, but apparently the bright spots in the global economy aren’t going to sway international equity markets, as they are showing a downward bias today.
In the mean time, US Treasuries look to remain within striking distance of their recent highs, with the flow of upcoming numbers potentially serving to lift prices back to their highs. We continue to think that Treasuries are going to be held back because of risk and reward fears associated with purchasing at such low historical yields. Critical support in September bonds is rather close-in at 127-28, with little in the way of resistance seen until the old high of 128-19. Initial support in September T-Notes is seen at 122-20, with little in the way of resistance seen until the old high of 123-01.
At least in the near term, the bull camp looks to retain the edge, as there is no scheduled data to fully alter sentiment and it doesn’t appear as if Washington is on the verge of launching a fresh stimulus effort. About the only way to quickly undermine Treasuries would be to see concerns toward the deficit take precedence over take the fears of slowing in the headlines.
Tags: Bonds, Financials, Interest Rates
About Dave Hightower