August 27th, 2009
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Treasuries digest
A better than expected GDP report and a late session rally in equities prevented Treasuries from reacting positively to a strong 7-year note auction. Additionally, a sharp and sudden decline in the greenback kept bonds and notes under pressure during afternoon trading.
The U.S. government sold $28 billion in 7-year notes at a rate of just over 3%. The bid to cover was a healthy 2.74 and foreign buyers seemed to be present given the 621.2% indirect bidder rate. The market seems to be torn between the massive supply and nearly as impressive demand for the securities.
Friday on a light volume week such as this is a tough call. Our upside projection in the 30-year was 121, with potential for 121'24, coming in and today's high of 121'07 was in the vicinity. This leaves us on the fence in regards to tomorrow...However, we would prefer to see a continuation of the rally to just under 122 as we think that this could be a good opportunity for a short-term bearish trade.
The note rally has been a bit lethargic, have been calling for the mid-118's again but still think that 119 is in the cards at some point. However, it is difficult to determine whether they will continue higher from here or pull back to just under 117 before resuming the up-trend. After all, today's high wasn't terribly off of our expectation and that may have been all the market has in it for now.
Don't forget that the CME Group is officially changing the minimum tick size in the 30-year futures contract to 1/32 from 0.5/32 beginning Sunday night. The change will not impact any other Treasury futures, nor will it change the way that bond options are quoted. If you recall, this is the original format of the contract and the change is likely being welcomed by open outcry traders. The exchange is asking that all GTC orders be canceled by customers, otherwise they will be automatically canned. GTC orders can then be re-established following the Sunday night open.
* 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.
