August 9th, 2010
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Low yields, Treasuries might be losing luster
Investors seem to be willing to look back into risky assets for better returns in recent days and weeks. After all, the U.S. dollar has given back much of its "safe haven" gains, commodities have come back into favor and the stock market has managed a way to find stability.
Accordingly, there has been a clear shift in investor sentiment and at some point this will begin to lure money out of pathetically low yielding assets such as Treasuries and even bank issued CD's.
In addition, don't forget about the factors we mentioned late last week. Consistently higher commodity prices will begin to put pricing pressure on the economy; in turn, inflation concerns would work against the Treasury bulls. Also, a weak dollar has historically been a drag on bond and note prices; although the market seems to be ignoring the dollar plummet now this could change.
We have been looking for the long bond to trade 130, and possibly as high as 131. It now looks like the market could fall short of our 131 projection. This figure was based on the premise of a stock market correction but it now looks like equities corrected and recovered in the blink of an eye. We like being bearish bond and notes just above 130 and near 125 respectively.
Tomorrow's Fed meeting is the wild card, if you choose to play the markets you should also choose to tread lightly. Volume is incredibly light and this exaggerates the event risk surrounding the interest rate decision. Look for potential bearish opportunities on a Fed meeting rally.
* 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 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.
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Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
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Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
http://www.DeCarleyTrading.com
http://www.ATradersFirstBookonCommodities.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.
