The Bond Bulletin by Carley Garner

[carleygarner]

March 5th, 2009

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Bond futures bid on stock slump


Equity futures came into the day under pressure to pave the way for higher Treasury prices and lower yields. Treasury traders revisited the premise that the Fed may look to buy long-term debt issues in an attempt to manipulate interest rates in ways other than monetary policy.

The reminder was the announced plan by the Bank of England to purchase $2 billion pounds in Gilts next week. Reuters reported that following the news, the 10-year gilt contract "shot up more than 350 ticks on the day and yields on the 30-year gilds fell 45 basis points, on track for their biggest one-day fall this decade and possibly ever, traders said."

Conversely, the Treasury announced that it will offer a record $34 billion in 3-year notes. They will also be reopening $18 billion in 10-year notes and $11 billion in 30-year notes. The numbers were much larger than anticipated but was grossly overshadowed by bullish news in Treasuries.

Also fueling the bond and note rally, traders spend the day positioning themselves ahead of tomorrow's highly anticipated employment report. The U.S. economy is expected to have lost about 650,000 jobs last month with the unemployment ticking up to 7.9%. However, at such lofty levels .3% doesn't feel like a tick any longer.

We have been expecting a rally in the 30-year bond above 128 and although yesterday was a bit misleading, we feel as though we it may be in the cards for tomorrow or early next week. Keep in mind that small speculators are heavily short and they will be quick to cover if the 30-year pokes above 128. The 10-year note shouldn't run into resistance until 122'20 and we will be strongly considering a bearish position in the 5-year note near 117'28.



* 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.



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.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat





*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.

 

[carleygarner]

March 10th, 2009



Bond futures offered on stock market bid



The equity markets finally found footing on Tuesday and the new found optimism weighed on Treasuries. Additional pressure came at the hand of $34 billion in 3-year notes being issued at a "respectable" offering. Along with government backed issues, corporate bond selling is working against Treasuries.

Similar to yesterday, there was very little in the way of economic news. Wholesale inventories was the only release and traders didn't seem to pay much attention. The government reported that wholesale inventories dropped .7% last month, much more than had been expected.

What Tuesday's session did have, that Monday's didn't, was the added insight of Washington officials. Bernanke spoke in regards to banking regulations and the necessity to revive the banks before the economy can follow suit. Overall, Bernanke's comments were stock friendly and bond heavy. He suspects that there could be growth as early as 2010 should the circumstances fit.

In the meantime, Treasuries continue to be largely range-bound. Given the circumstances it seems as though the note and bond are destined for support near 119'22 and 123'06 respectively. If you are a five-year note trader, there seems to be significant support at 116'07 then again near 116'01. Should equities continue their short covering rampage, it may be possible to buy the 5-year near 116 and it may be good for a temporary bounce. The June 5-year tends to see a rather large and quick rally from mid-March through the 20th. That said, traders shouldn't get greedy. Beyond the 20th, the market typically sells off relatively sharply.

If you took the June Eurodollar trade, look to exit near 98.65.



* 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.




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.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

March 9 - Buy the June Eurodollar near 98.46. We aren't recommending stops or insurance with options at this point in time.




*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.

 

[carleygarner]

March 11th, 2009


Quantitative easing?


After a considerably weak open, the Treasury market was finally able to reverse course following the day's auction and on rumors that the Fed will actually begin the "quantitative easing" policy of buying long dated Treasury securities.

The Bank of England conducted a reverse auction today in their first attempt at "quantitative easing". The BOE will be buying two billion pounds worth of 5-year and longer dated gilts. The efforts overseas renewed some concern over the Fed taking similar action, but wasn't until later in the session that traders were overcome their obsession with supply.

Treasury traders can't seem to get over the supply hump. Along with the $18 billion in 10-year notes being reopened, GSE Fannie plans to sell 5-year notes on Thursday on what is supposed to be record size. Don't forget that Fannie sold $7 billion in 5-year notes in February and $15 billion in 2-year notes marking the largest issue by a government backed agency. The agency also sold $2 billion in 3 and 6-month bills today.

Also dragging on prices on the long end of the yield curve in early trade, PIMCO is publicly recommending TIPS as they see inflation may be heating up.

The long bond and the 10-year note didn't quite see major support levels before the rally but it seems as though it was enough to spark buying that could bring us back up to the top of the trading range. The 30-year Treasury futures will have to hold consistently above 127'05 to keep the upswing intact. We are looking for another retest of the 128/130 area. That said, the market won't stay range bound forever and a breakout seems likely. Based on seasonal assumptions, the move may eventually occur to the downside following a retest of resistance.

In yesterday's newsletter we pointed out support in the 5-year note near 116'07 noted that getting long the June 5 year near 116 could be good for a quick bounce. Hopefully you were able to capitalize on this. If not, I wouldn't recommend chasing it. We may get another opportunity shortly. Stay tuned.

If you are holding the June Eurodollar trade, we recommended to those trading with us to take profits this morning near 95.60. However, our target remains a little higher and there may be an opportunity to get out at the original projection of 98.65 or a bit higher...I will leave the exit up to you.

* 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.




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.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

March 9 - Buy the June Eurodollar near 98.46. We aren't recommending stops or insurance with options at this point in time.
• March 11 - If you are holding the June Eurodollar trade, we recommended to those trading with us to take profits this morning near 95.60. However, our target remains a little higher and there may be an opportunity to get out at the original projection of 98.65 or a bit higher...I will leave the exit up to you.





*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.

 

[carleygarner]

March 12th, 2009


Successful auction and another big rally but will it last?


Treasury futures enjoyed another session of significant gains despite a similarly impressive rally in equities. Economic data was mixed, but at least there was some guidance.

Retail sales were reported to be a negative .1%, better than the expected -.5%. An upward revision to last month's figure was also a slightly positive indicator. Jobless claims inched up from last month while business inventories declined by 1.1%.

Reopenings sometimes see limited interest, but that wasn't the case this time. The Fed reopened $11 billion in 30-year bonds with surprising success. The good news excited the market and gave traders a reason to bid prices closer to the upper realm of the trading range as buyers were lured into the market and buy stops were elected.

Bonds and notes have approached major resistance levels but seem to have some room to move on the upside. Equities have just posted their first three day winning streak in months and may be due for some back and filling and this should keep a floor under pricing. The long bond should begin to run into trouble near 128 and possibly 129. However, from a seasonal and technical standpoint this seems like a great place to be a bear. That said, caution is warranted simply because a break above resistance could mean a large short covering run as stop orders are triggered. The note, on the other hand, will find resistance just under 123 the same bearish opportunity exists but shorts should be aware of the possibility of an artificial breakout.

Sorry so short!


* 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.



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.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

March 9 - Buy the June Eurodollar near 98.46. We aren't recommending stops or insurance with options at this point in time.
• March 11 - If you are holding the June Eurodollar trade, we recommended to those trading with us to take profits this morning near 95.60. However, our target remains a little higher and there may be an opportunity to get out at the original projection of 98.65 or a bit higher...I will leave the exit up to you.






*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.

 

[carleygarner]

March 13th, 2009


Position squaring and stocks dominate Treasuries


Simply looking at a daily chart of any of the Treasury futures suggests relatively tame price action in recent sessions. However, a look at the intraday chart reveals a different story as we are in the midst of one of the most indecisive Treasury markets that I have witnessed.

There are clearly compelling arguments for both the bear and bull camps. On one hand we are facing unprecedented amounts of supply thanks to relentless government debt issues, bearish seasonal tendencies and potential inflation down the road. Also, equities seem to be holding gains and may enjoy a rally that spans over the next week or so.

However, there are other market influences at play that are not as obvious such as heavily short small and large speculators. Small speculators can be fickle and will "bail" at the smallest signs of a rally. Also, when market sentiment is leaning to one extreme, the market has a tendency to do the opposite. This is a bit concerning in that I haven't come across many traders or analysts that are fundamentally bullish Treasuries. The most compelling argument for a bond and note rally is the fact that "investors" are now being marketed on the new ultra short Treasury ETF's. I seem to remember the influx of new commodity ETF's just as the bubble was bursting. By the way, clearly I am a bit bias as a futures broker but Treasury futures are a much more liquid and efficient way to speculate. ***Warning, that is an opinion.


After considering the pro's and con's of Treasuries, I remain overall bearish but I can't emphasize the need for risk management enough. If resistance levels are broken, the climate could change drastically. The shrinking volatility and tight trading range won't last for long. Bearish positions should be hedged!

We continue to doubt the market's ability to get above 128 in the 30-year bond and 123 in the 10-year note. In fact, depending on how things look on Monday we may be interested in recommending a short position in the 5-year note near 117'23.

I will be traveling over the weekend and it will prevent me from issuing a newsletter on Monday. Feel free to contact me at your convenience.

Have a great weekend!!

* 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.




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.


Flat




*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.

 

[carleygarner]

March 18th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


We knew it wouldn't last


As we have been warning in the previous weeks, the volatility lull in Treasuries couldn't last; instead, it was the calm before the storm. We also pointed out that despite bearish fundamentals, the break out of the range could be on the upside due to the impact of quantitative easing and a very large number of short traders.

The fact that the market was too short, left the Treasury complex vulnerable to a massive short squeeze and today was the day. We refrained from recommending short option plays in this market due to the possibility of today's massive move but feel as though that may be a viable play going forward. However, we will wait for the dust to settle. Unfortunately, we also refrained from being long volatility as we would have liked because of already high option pricing.

The Fed confirmed that they will be buying longer dated maturities in the amount of $300 billion over the next six months. According to my sources, they will buy the 2-10 year maturities.

The latest CPI reading was a non-event. While the number suggested a slight uptick in pricing pressure at .4%, it was widely expected. Similarly, the current account deficit was reported at levels near consensus estimates. However, coming into the day traders were more concerned with the Federal Reserve's interest rate decision but better yet any hints as to what we can expect in the future.

Once again, trading volume was on the light side but did pick up a bit on what seemed to be either position squaring in the last few hours before the announcement, or simply positioning in anticipation of quantitative easing talk. As it turned out, those that were getting long into the announcement literally hit the lottery in their trading accounts.

The U.S. dollar hasn't been dragging on the 30-year bond as it should be. The index has fallen from the low 90's and appears to be approaching the mid-80's in recent weeks. Nonetheless, we are expecting a push in the Dollar toward 81.80 and in the absence of political distractions Treasury traders may take note.

The June 30-year bond settled over two handles off of its daily high, and ended the day in the green by over three handles. it seems as though a close above 130 in tomorrow's session suggests that we could be in store for much higher prices and possibly even 142 again. Similarly, I suspect that the 10-year note will trade above 130 again. Our intermediate term target in the 5-year note is 122'05.

* 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.




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.

Flat






*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.

 

[carleygarner]

March 19th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Ultra-short Bond ETF's killed the bond bear


Yesterday's bond and note rally marked the largest single day drop in benchmark yields since 1987 (based on the cash market close). Today traders were simply attempting to digest the news.

Treasury futures spent the day consolidating after being the victim of a quantitative easing bazooka. However, despite the relatively calm session I am not convinced that the volatility is behind us. I have only seen this size of a move once before, in the fall of last year, and I happen to remember a consistent rally following the spike. Whether or not there is fundamental basis for Treasury buying is irrelevant. Technical trade, short covering and governmental policy will dictate prices in the near term. In this type of environment, it is better to be safe than sorry. I recommend that anyone holding multiple bearish positions, lighten their load as the risks will be elevated going forward.

My guess is that while many of the shorts were likely squeezed out in yesterday's spike high, there are more. Also, It seems as though the equity market is vulnerable to a pullback, if this occurs it should provide additional support to Treasury futures.

I hate to say it, but I mentioned at one point last week that the newfound popularity of ultra short bond ETF's seemed to be suspect. Too many bears and new bearish products suggest that there are higher prices yet to come. As mentioned in yesterday's report, we could see the 30-year bond trade back into the high 130's and even low 140's. At this point, I am expecting the 10-year note to trade above 130.


In my conversations today, I ran across a handful of short option traders with accounts at a discount brokerage firms. As I have mentioned in the past, these firms are built around a business model in which they make very little in commission revenue per transaction but survive by doing large volumes and benefiting from the float (interest earned on client deposits). They don't have "brokers", instead they are typically staffed with clerks that handle massive numbers of accounts. Accordingly, during highly volatile situations they don't have the manpower, nor can they afford the risk due to ultra-low commissions, to give individual accounts the attention needed to prevent unnecessary margin liquidation.

The benefit of working with a brokerage firm such as us, DeCarley Trading, is that we won't blindly liquidate positions. Instead we work with our clients to ensure that they have a chance to rectify any margin deficiencies along with us as opposed to at the terms of an inexperienced discount brokerage clerk. We aren't necessarily the cheapest when it comes to commission rates but we are competitive and in our opinion the money spent in additional margin costs will be easily made up for in your bottom line. Imagine being involuntarily closed out of several short call options on yesterday's spike in a properly capitalized account in which there was no previous margin call...it sounds like it happened more than once yesterday. The additional commission costs to trade with us as opposed to a discount broker are minimal in relation to the damage that can be done in ill-timed forced liquidation. Don't trip over dollars chasing pennies!


* 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.



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.

Flat





*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

March 20th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Treasury futures leaning higher, but buying seems subdued


Treasury futures spent most of the day trading in green territory, but the realities of supply eventually weighed on pricing. Corporations are looking to increase cash flow to finance operations and are looking to bond issues as the source. Additionally, analysts are expecting sovereign (Dollar denominated bonds issued by foreign governments) debt offerings to tick higher.

There is also growing concern from China, the largest buyer of U.S. backed bonds and notes in regards to the "safety" of their investment. Without their consistent dollar (more importantly dollar backed asset) buying, the Treasury market remains vulnerable...and traders are well aware of this.

In the previous couple of newsletters I have pointed out the possibility of a continuation of the recent bond spike to levels not seen since December. I still feel as though this may be the case but I am cautiously looking forward to next week before trying to make any more bold predictions simply because I am getting mixed signals (just as everyone else is).

I have been a believer in bond seasonality, and have a hard time bucking history. According to my seasonal analysis, we are entering a bearish time of year for bonds and notes. Clearly this is in stark contrast to my predictions of 130 in the 10-year note and possibly above 140 in the 30-year bond. On the other hand, it seems as though equities could make their way lower. I am looking for the low 730's in the S&P and maybe even back to the 660's. If this becomes a reality, bonds and notes may live up to my original expectations.

If you are confused, you aren't alone. In a nutshell, I am going into the weekend with the sense that Treasuries could defy seasonality temporarily as the speculative shorts are squeezed from the market and short covering could bring us substantially higher. That said, inflation worries, seasonality and supply will stage a comeback as April approaches.

Have a nice weekend.

* 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.


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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

March 23rd, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Bad bank plan and stock rally weighs on Treasuries


Treasuries traded weaker as stocks boomed on details of the "bad bank" plan. However, bond and note traders are wondering when they will get details in regards to the Treasury's vague pledge to purchase its own debt issues.

Just as the massive stock market moves were made in light volume, the lack of massive price moves in Treasuries was done in thin trade. Government fixed income securities seem heavy, and despite last week's spike, have had little upward momentum. However, the bears are also displaying a lack of conviction. There are far more speculative (fickle) shorts in this market than longs. If I were a gambler, I would say after some digestion the 30-year and the 10-year note will be more likely to go up than down. That said, the near-term direction is highly dependent on any details in regards to Treasury buy-backs.

Also weighing on Treasuries is the U.S. greenback. A cheaper dollar, in theory, would lure foreign investments into domestic securities. However, the problem is that many foreign central banks and other investment entities are already heavily weighted in U.S. backed securities. The plummeting dollar does more to trigger liquidation that it does new capital inflows.

There is a lot of event risk going into tomorrow. Bernanke and Geithner will be speaking before the House Financial Services Committee to discuss AIG bonuses. Later in the evening, President Obama will hold a televised news conference.

The June 30-year futures contract must hold (close) above 128 in order to avoid a push lower to 126. Believe it or not, the recent digestion hasn't disrupted the technical projections for higher prices. At 128 we have merely retraced last week's rally by 50%. I won't completely give up on a continued rally until I see failure to close above the 61.8% Fibonacci support near 127. Likewise, the T-Note could pull back to 123 without compromising the bullish posture.

We recommend being flat going into tomorrow's events.

* 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.



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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

March 24th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Auction suggested Treasury demand


The Fed issued $40 billion in 2-year notes this afternoon with a decent amount of demand seen for the instruments. Tomorrow, the market will absorb the 5-year and 7-year note auction and supply and inflation concerns seem to be outweighing any positive impact of demand. Keep in mind that the Treasury will be auctioning $34 billion in 5- year notes and $24 billion in the new 7-year notes and along with government backed securities, corporations are looking to raise cash through bond sales.

The trading volume in Treasuries, and stocks for that matter, was thin at best and this leads me to believe that the early morning selling was artificially exaggerated. Nonetheless, light volume works both ways. The late session buying also benefited from the lack of market participation. Much of the boost can likely be attributed to the Fed announcing that they could begin buying Treasuries as early as tomorrow.

I was a little surprised to see the magnitude of the pullback in the 30-year bond but my criteria of seeing a close above 128 has been met. I am going against the grain on this one and calling for higher prices on the long end of the curve. The next resistance should be near 130'04 but I think that a retest of the recent highs in the mid-132's could be seen by the end of the week.

We are expecting to see similar action in the 10-year note. The first resistance will likely be found near 125'08 but the odds seem to favor a move to 125'08 in the coming sessions.

If you have been following this newsletter for a period of time, you have likely noticed that we have considerably cut back on the number of trading recommendations provided. Many of you have voiced concerns and even boredom over our inaction in the 10-year and 30-year Treasuries. However, we stand by our decision to take a step back from more aggressive and active trading.

There are hundreds/thousands of readers of this newsletter some of them being highly experienced and others are just dipping their toes in futures and options trading. It would be irresponsible for us to recommend trades simply to add to the excitement factor of the newsletter, or to generate commissions for those that are trading with us. We strongly believe that there will be more favorable trading conditions for our approach and strategy and look forward to becoming more aggressive. In the meantime, we have been comfortable with the trades that we have been suggesting in Eurodollars and the 5-year notes. We also work closely with clients that are interested in being much more active in their trading and offer daily and intra-day guidance.

* 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.



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.

Flat





*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

March 25th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Poor auctions and positive economic data drags on Treasury futures


A lack of demand for sovereign debt and a poor showing in domestic auctions left Treasury futures vulnerable. The Fed issued $34 billion in 5-year notes and are expected to issue a boatload ($24 billion) of the new 7-year note issues. As we have also pointed out, corporations have been scrambling to sell fixed income products to raise cash for operations. The result is an overwhelming amount of market supply.

After months of speculation, the Fed finally began purchasing long dated Treasuries. However, it almost seems like old news at this point and traders are wondering whether the Fed's bark was much larger than their bite. Traders hardly even blinked at the $7.5 billion in notes purchased by the U.S. government today.

Recent economic data has shown moderate signs of life, and today's releases weren't an exception. Durable goods were reported to be up 3.4% despite expectations for a draw of over 2%. New home sales were also on the rise, beating estimates as well as last month's figures.

We are beginning to seriously question our expectations in the Treasury market. We have been calling for a continuation in the Treasury rally but the market has done nothing but prove us wrong. Today's close below 128 in the 30-year bond suggests that the bias remains downward but I wouldn't put my money on it. The next major area of support is 126; if stocks turn over as we expect, the long bond should find some buying interest at such levels.

The note has managed to squeak out a close above our "make or break" level near 123 but it seems like we could even see 122 before buyers are interested once again.

We would like to see a move in the June Eurodollar near 98.70 at which point we would prefer the short side.

* 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.




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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

March 30th, 2009

Catch me on Facebook!

Bonds and notes eek higher

The Treasury futures markets have made it a habit of giving up market bids in afternoon trade. At the close of the day session, the 30-year T-Bond was nearly a handle off of its high. This was nearly identical to Friday's trading pattern. The good news for the bulls is that the market is creeping higher, the bad news for the bulls is that it is moving slowly enough to allow for a lot of second guessing.

The volume has been painfully light, leaving the market vulnerable to sharp breaks one way or the other. For now, we are favoring the upside as it seems as though equities are having a difficult time swallowing government intervention into capitalism.

Similar to the last round of Fed buying, Treasuries made their way higher in anticipation of quantitative easing but relaxed after the fact. In the case of today, the Fed only bought $2.5 billion in securities as opposed to the previous rounds of $7.5 billion. One would think that the disappointment would have forced bonds and notes immediately into the red but that wasn't the case.

The most influential story of the day was the Fed's big three auto bailout plan. Clearly, the more taxpayer money that is thrown into the black hole the more money the Fed will have to borrow. With a lack of economic data, supply concerns remain the dominant force.

Both the long bond and the 10-year note managed to hold support as measured by the Fibonacci ruler and could be in the process of retesting the recent spike high. In the meantime, we will continue to look for our first target area in the mid-to-high 130's in the T-Bond and mid-125's in the note.

We still like the short side of the Eurodollar from better levels and will be patient for what we deem to be optimal entry.

* 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.





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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 2nd, 2009

Catch me on Facebook!


Is the Treasury bear back?


Booming equities and position squaring ahead of tomorrow's jobs data sharply reversed bonds and notes. We had been calling for a rally to 131 over the past couple of weeks, it wasn't as "pretty" as we would have liked it to be but nonetheless the high in overnight trade was just under our target. Had the market broken through 131 we could have seen stop running and short covering to retest the spike high near 133. Clearly, this wasn't the case; this leaves us believing that the new path of least resistance will be lower.

The unemployment report may complicate things and even prove our analysis wrong but we feel as though the next likely target in the long bond will be 127'24 and a close beneath this level could bring the market right back to where it began near 124.

We were hoping for a chance to sell calls against the upswing but seem to have missed out this time around. Perhaps on the announcement tomorrow traders will get an opportunity to execute bearish positions.

The note on the other hand, never reached our upside target and spend much of Thursday erasing gains made in the week or so. There seems to be respectable resistance near 123'01 and the market will have to continue to hold above such levels to avoid a sweeping sell off to 120'10.

Non-farm payrolls are expected to show a decline of about 650,000 jobs. However, ADP's predictions of about 100,000 additional job losses and this morning's initial jobless claims figure of 669,000 it seems as though the worst is priced in. If this is the case, the odds favor a bearish reaction from bond traders. If you are an aggressive trader, you may want to look to sell futures on rallies above 130, with potential for a temporary rally to 130'21.

*** We apologize, due to time constraints this report has not been posted regularly to outside websites. However, keep in mind that subscribers receive the reports in more timly fashion. If you found yourself waiting for this newsletter, perhaps you should consider registering for our newsletter on either of our websites.


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.

April 1 - Sell the 5-year note near 119'14 or better.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat





*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 3rd, 2009


Catch me on Facebook!


Weak unemployment numbers but no surprises


Resilience in the equity markets, an uneventful employment report and end of week position squaring sent bond bulls running for the exits. The long bond settled nearly 2 handles lower on the day with the 10-year note not far behind.

Aiding the sell off was positive news out of China that suggested that the economy was showing signs of life. Accordingly, a Chinese equity firm is predicting that the recent Chinese stimulus package is working and could boost growth to as much as 10% next year. This sounds a bit optimistic to me, but if emerging markets can get back on their feet so quickly the rest will follow and demand for safety assets should diminish.

In domestic news, the U.S. government reported that the unemployment rate rose to 8.5% last month and in the process lost 663,000 jobs. The numbers were poor but highly expected and already accounted for in pre-employment report trade.

Following yesterday's early morning (so early it was overnight) reversal from significant resistance in the 30-year bond, today's weakness wasn't surprising. Although, we didn't necessarily expect the velocity of the move. As mentioned in yesterday's commentary, we believe that the long bond could return to the 124 level. Similarly, we mentioned that the 10-year note would have to hold above 123'01 to avoid a sweeping sell off to 120'10 and it looks like that is underway.

Sorry so short, have a nice weekend !

* 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.




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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 6th, 2009

Catch me on Facebook!


Early Treasury bid fades on supply concerns


Despite a valid attempt at a technical bounce in the Treasury complex, prices were weighed down by a week full of auctions. Along with the issuance of 3 and 10-year notes, the Fed will be reopening some previously issued securities. On the other hand, the Fed was said to have purchased $2.53 billion in Treasury securities today. However, this is miniscule when compared to issues.

Not surprisingly, the day's trading volume was on the light side. Lack of trading interest has plagued the market for several months and the shortened holiday week isn't helping. Don't forget that the U.S. bond market will close early on Thursday and won't reopen until the following week.

Unlike last week's event packed schedule, this week offers little in the way of economic news or even Fed speak. Instead, traders will be left to rely on auction related events and equity market trade.

We are approaching the market this week with a slightly bearish tilt as we still believe that the 30-year bond will trade near 124 in the coming sessions. That said, there is critical resistance near 127'25 and the market must trade consistently below it in order to avoid another run at the highs. However, given the seasonal picture as well as issues of $35 billion worth of 3-year notes, $18 billion in reopened 10-year debt and $6 billion in reopened 10-year inflation index notes we find it hard to believe that buying interest will make its way to the market prior to seeing a 124 print in the long bond. Although we are expecting weaker prices in the near term, we don't expect a complete market meltdown. If we are correct in our targets, we may look to sell the May bond 119 puts for about 20 ticks.

The notes on the other hand have some room to move on the upside before violating the down-trend. With resistance at a distant 123'02 we are looking for a continuation of the selling pressure to lead the note to the mid-120's.






* 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.

Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

April 6 - We may be looking to sell the May Bond 119 puts for 20; it will take considerable weakness to get filled.

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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 8th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Reminders of Quantitative easing help bond rally


Treasury bonds and notes posted a positive session in light trade as the market is constantly reminded of the Fed's pledge to keep a cap on interest rates. Additionally, the day's record $35 billion auction of 3-year notes seemed to be a success.

Traders likely treated the release of the FOMC minutes as their cue to evacuate ahead of the holiday weekend. Tomorrow is a shortened day for bond traders and Friday will be "dark" (as we say in Vegas). There was an obvious decline in volume following the announcement and I have a feeling that tomorrow will see little action.

According to the Fed, "Credit conditions remain very tight, and financial markets remained fragile and unsettled, with pressures on financial institutions generally intensifying this year." However, bond and note traders were only paying attention to the comments at the end which reminded the markets that the Fed will buy up to $300 billion in longer-term Treasuries and $850 billion in agency mortgage debt.

In the last newsletter we stated:

We are approaching the market this week with a slightly bearish tilt as we still believe that the 30-year bond will trade near 124 in the coming sessions. That said, there is critical resistance near 127'25 and the market must trade consistently below it in order to avoid another run at the highs.

Consequently, the T-Bond is trading near our critical pivot area of 127'25. We still feel as though failure at current levels suggest that our 124 objective will be met but thin markets leave the door open for many possibilities.

In regards to the 10-year notes, we noted:

The notes on the other hand have some room to move on the upside before violating the down-trend. With resistance at a distant 123'02 we are looking for a continuation of the selling pressure to lead the note to the mid-120's.

Similar to the long bond, the 10-year note is trading at or near our "make or break" level. There is some risk of a breakout higher, but we remain cautiously bearish and believe that the odds favor a move to 120'20ish.

The interest rate markets have become snoozers in terms of trading opportunities as our models have produced very few signals. However, we are patiently awaiting an opportunity that we can be confident in. Stay tuned.

* 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.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

April 6 - We may be looking to sell the May Bond 119 puts for 20; it will take considerable weakness to get filled.

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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 9th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Holiday trade, no safety bid in bonds


Bonds and notes suffered sizable blows in pre-Holiday trade as safe-haven buying dried up in light of the newfound equity market strength.

Treasury traders didn't seem to concerned with the fact that the Fed will be buying again next week. Supposedly, they will be looking to buy across the curve beginning with the 1-year Treasuries. The transactions are expected to take place on Monday, Tuesday and Thursday. While we feel as though Fed buying will keep a floor under the market (and a cap on yields) in the near term, we also feel as though bonds and notes are destined for lower valuations in the coming couple of sessions.

If you were watching intraday price action, you were likely shocked to see a nearly full handle rally in the 10-year note without much warning. The move took place following an auction of re-opened 10-year notes. The Fed sold $18 billion worth of notes to decent demand.

Next week offers little in terms of economic news so traders will be relying on the stock indices and currency markets for guidance. Because of this, market liquidity may be slow to return to the marketplace. If this is the case, it seems as though the path of least resistance is lower.

However, mid-April should provide a few more fireworks. In the week beginning April 13th, we will hear about the latest inflation news, the Fed's Beige Book, housing data, the Philly Fed, and TIC numbers (which show the cash inflows and outflows of U.S. securities).

I have adjusted my downside targets in each of the Treasury contracts. Although I have been calling for 124 in the T-Bond it now seems as though that may be a stretch. Instead, I see heavy support near 124'16 and we could see this level by early next week. In the 10-year note, I am now looking for the Mid-March lows near 120'24.

Have a great Holiday!


* 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.




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.

Flat





*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 15th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Choppy but overall unchanged Treasuries


The absence of Fed buying and mixed economic news lead to a choppy but overall uneventful trading session. Today's stalled rally makes many wonder whether Treasuries can continue higher without help from the Fed. Our charts say yes, but only time will tell if our analysis will prove accurate.

Bond traders were looking to Wall Street for guidance, but came up short in light of a directionless equity session. Stocks waffled near unchanged for much of the day, as traders are squaring ahead of option expiration and finding more excitement in regards to the tax tea parties.

TIC data reported that net foreign purchases of Treasury bonds and notes totaled $21.55 billion. The news was supportive of the recent rally in that it suggests that despite yields and government spending, overseas investors continue look to Treasuries for a safety play.

The most significant news of the day was the Fed's Beige book but the result was relatively predictable. The economy is still contracting, although the highlight of the report was that 5 of the 12 districts reported that contraction had slowed last month.

We are still "feeling" higher here. First resistance in the 10-year note stands at 124'10 but a little over 125 in the coming sessions seems likely. If we are right, the 5-year note should trade at or near 119 in the same time frame. If you are watching the long bond, a break of 128'10 should lead to a retest of the 130 area.





* 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.

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.

Flat




*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 16th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.

Treasuries stumble on prospects of economic recovery

A string of "not so bad" economic news has removed some of the safe-haven bid from Treasuries to leave the market overall directionless. Bonds and notes are seemingly lifeless. They have essentially traded sideways thus far in 2009 as most traders are struggling with market fundamentals and going against the Fed. Although, so far the Fed's bark has been bigger than the bite; despite the large rally following their verbal commitment to purchase $300 billion in securities, yields are sitting at or near levels seen immediately prior to the announcement.

Aside from mixed economic news, the IMF released its bi-annual World Economic Outlook and claims that the current global recession is expected to be unusually long and severe. They also noted that the recovery will likely be sluggish. On the other hand, Atlanta Fed President Lockhart portrayed a rather optimistic view to the domestic recovery prospects. Lockhart predicts that the U.S. economy will be on the mend in the second half of 2009.

We, as are many that we speak to within the industry, are having a relatively difficult time getting a handle on bonds and note prices given the recent government intervention and investor irrationality. Many of the technical, fundamental and seasonal analysis tools that were helpful in the past have become nearly worthless.

The 30-year bond has been stuck in a tight range between 126 and 128, without regard to a few outlying price bars, but this can't last. The eerily quiet trade is more than likely a precursor to something much more dynamic. Picking a direction for tomorrow faces the same odds of success as flipping a coin, so we won't go there. Aside from what may be a retest of support near 126'05, it doesn't feel as though the market is ready to meltdown. We favor the upside from beneath 126 and on a big enough dip may even be willing to recommend a bullish strategy.


* 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.




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.

Flat






*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.

 

[carleygarner]

The Bond Bulletin By Carley Garner

April 20th, 2009


If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Faltering stocks revives safety play


Suddenly the safe-haven sentiment absent in Friday's session was in control of Monday's trade. Treasury bonds and notes recovered most of Friday's dramatic losses as equities fell out of favor. The lack of economic news exaggerated the negative correlation between the asset classes, and we suspect that this could continue to be the case as the weak progresses. The only significant news to speak of is durable goods orders and home sales much later in the week. In the meantime, interest rate traders will be focused on stock earnings, specifically stock trade, for directional help.

The March index of Leading Indicators reportedly declined by .3% according to the Conference Board; this was the third consecutive monthly draw. While the news likely wasn't a catalyst to the bond and note bid it likely defended the possibility of an intraday pullback. Accordingly interest rate products traded steadily higher throughout the day.

The recent dollar rally has managed to stay below the radar, but given the slow news week may be considered highly supportive by many Treasury traders. That said, the greenback may start to lose momentum as the dollar index futures look a bit overbought at current levels.

In Friday's newsletter we stated:

I can't help but feel as though the stock and bond markets are due for a reversal, if not intermediate-term at least temporary. With both markets trading near what seem to be relatively extreme pricing in regards to valuations thus far in 2009, we could see a much different picture at some point next week.

We are looking for a continuation of the upmove in the T-bond to 127'20 but don't hold a strong opinion in either direction once this level is reached. Similarly, the 10-year note may continue higher to 123'20 but from there it will be a "wait and see" scenario.

We hope that you were able to participate in the traded recommended on Friday (below). Our clients were advised to exit the long 5-year note futures this morning at a profit, with aggressive traders looking for prices near 118'01 and conservative locking in profits just above 117'20. As far as the short bond 118 put goes, we will be looking to take a profit on this shortly.


* 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.



Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

April 17 - We recommended to sell the June Bond 118 puts near 20.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 17 - We recommended to buy a 5-year note futures contract near 117'12.5
• April 20 - Our clients were recommended to take profits today at any point above 117'20 and at or near 118'01 for more aggressive traders. In this instance, aggression would have paid off.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat



*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.