Flight to quality bid in Treasuries
The Bond Bulletin
by Carley Garner
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2010-02-05
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February 5th, 2010
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Flight to quality bid in Treasuries
Although the non-farm payrolls data was reported to be in line with expectations, it was an action packed end to the trading week. The day's economic news leaned lower in Treasuries but a volatile stock session and sovereign debt risk issues prompted some flight to quality buying.
According to the government, the U.S. economy lost 20,000 private sector jobs last month and the unemployment rate fell to 9.7%. Like this pro football player says...what is everyone crying about? http://www.cnbc.com/id/15840232/?video=1405435640&play=1
However, most believe that the drop in the unemployment rate can be attributed to a shrinking job pool as opposed to actual improvement. As we all know, the stats don't account for those that have given up on finding a job or are "underemployed". Accordingly, the pain being felt throughout the economy is worse than what is shown on paper.
Next week's calendar will be much less active and this leaves traders to focus on the upcoming auctions and testimony from Fed Chair Ben Bernanke. Don't forget that $40 billion in 3-year notes, $25 billion in 10-year notes and $16 billion in 30-year bonds will be auctioned...and this is a considerable amount of supply for the market to absorb.
In yesterday's newsletter, we were looking for the bonds to rally to 120 and the 10-year notes to see 118'25 and today we got it (almost). The note seems to be getting near-term toppy but the bond never reached our objective and may have a little room to run on the upside before a temporary reversal can occur.
Our weekly charts are suggesting that the note could reach a bit over 121 before reaching a seasonal peak in March. Similarly, the T-bonds could see 123 again.
* 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
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| Meet the Author |
Carley Garner
Senior Analyst and Broker; Stocks and Commodities Magazine columnist; Author of "A Trader's First Book on Commodities" and “Commodity Options” published by FT Press a division of Prentice Hall.
The Bond Bulletin has contributed 294 issues.
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