August 25th, 2009
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Auctions on tap
Treasuries traded on both side of unchanged but ultimately moved the higher on the day. Despite overnight buying in bonds and notes, concern over the 2-year note auction and higher equities dragged government backed fixed income products into the red prior to the auction results. However decent demand, from both on and off shores buyers, seemed to have kept bonds in favor for now.
The Treasury auctioned $42 billion in 2-year notes with a draw of 1.119% and a 2.68 bid to cover; the indirect bidder take was 49.4%. The borrowing cost was a little higher than the Fed had expected but it seems as though investors are still hungry for the securities.
Consumer confidence beat the street's expectations. The index was reported at a 54.1, much higher than the previous 47.4 and the expected 47.9. Likewise, the S&P/Case-Shiller Home price index saw a less than expected decline of 15.44%. As has been the case, the not-so-bad data has enabled bonds and notes to creep higher but has hasn't provided any reason for a break out of the current trading range.
Markets don't like uncertainty, and concern over a Bernanke replacement seem to have been put to rest. The Obama administration announced that Ben Bernanke will keep his position as Fed Chair. The news seemed to have stabilized the markets somewhat.
Both Treasuries and equities have fallen victim to the summer doldrums. Excessively weak volume will likely plague the remainder of this week and encompass all of the next two. Don't forget about the Labor Day holiday on the 7th in which U.S. markets will be closed.
We believe that equities could be getting a bit toppy in the near term, if this is true a 2 to 4 day correction in equities could feed another Treasury rally. Assuming we are right, we could see the 30-year retest the recent highs near 121 and the note back to the mid-118's. Likewise, the 5-year note could be headed toward the mid-116's. Support could be found near 118, 116'20 and 115'10 respectively.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
Flat
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Flat
Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.
June 29 - Our clients were recommended to sell September Eurodollar futures while buying a 9937.5 call as insurance. The calls were getting filled near 7 ticks, and the futures near 9933. This makes the total risk on the trade at expiration $287.50 before commissions and fees.
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
http://www.carleygarnertrading.com/
http://www.decarleytrading.com/
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
