The Bond Bulletin by Carley Garner

The Bond Bulletin By Carley Garner

June 25th, 2009


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Stocks and bonds rally in unison


The Treasury auction saw another good outing on Thursday. The government auctions $27 billion in 7-year notes to eager investors at just over 3.3% and a bid to cover at 2.82. Indirect bidders (assumed to be primarily foreign central banks) made up about 67.2% of the participation.

Additionally, the Fed was on the buy side of a respectable portion of the $9.526 billion in debt maturing between 2026 and 2039. The day's events and technical trade seems to have kept the bulls in control in the near-term.

It was a relatively light news day with mixed results. The weekly jobless claims saw an increase over the previous reading and was much higher than analyst estimates. First quarter GDP, on the other hand, was reported to be slightly better than what many had hoped for. However, at a negative 5.5% I don't think that anyone could argue that the news was good.

Choppy dollar trade leaves little guidance for treasury traders. The U.S. Dollar index has been trading comfortably between 82 and 79ish and doesn't seem to be going anywhere, anytime soon. This is relatively neutral for Treasuries.

In the meantime, the equity markets will play a large part in the direction of bonds and notes (despite today's disconnect from the negative correlation). It seems as though the major stock indices have a long-term negative bias. While there may be a temporary rally as investors are mulling over market fundamentals, I can't help but feel as though we will see the 870's in the S&P at some point. That said, the downdraft may not occur immediately and this may work against the Treasury rally in the coming week or weeks.


In our last newsletter, we noted resistance in the long bond near 117'24 and 118'01 which seems to have worked out nicely. We can't help but feel as though the market is getting a bit toppy; however, the 10-year note seems to have a little room to move on the upside and this may drag the 30-year higher. That said, we like the idea of being bearish from slightly higher prices. Perhaps selling August calls in the 124/125 strikes may be an optimal strategy. Aggressive traders may look to use the money collected on the short calls to purchase puts.

We are looking for just under 117 in the 10-year note, at which we begin to become bearish. Likewise, the 5-year note could see just over 115.

This report was written prior to the electronic contract rally this afternoon, but the analysis should still be relatively current. I am speaking at a CFA (Certified Financial Analyst) event tonight, so time is a little scarce.




**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.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)
• June 10 - We rolled the July 10 puts from the 112 puts to widen the strangle, we gave up about 41 ticks in premium to do it.
• June 12 - We recommended that our clients buy back the 109 puts for 8 ticks.
• June 15 - We recommended that our clients (with this version of the spread) buy back the 110 puts for 8 ticks.

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

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'25
• June 4 - We recommended readers with this position to purchase a 114 put for insurance, hopefully if you have this trade on you were able to do so. Doing this would limit the risk on the trade to approximately $1,500 before commissions and fees.

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.
 
The Bond Bulletin By Carley Garner

June 26th, 2009



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Consumers confident but tight fisted



Treasury traders continued to bid bonds and notes higher into week's end. This is in contrast to the notoriously habitual countertrend trade often seen in the interest rate markets. However, volumes were light and trade was uninspiring. It seemed as though bored traders called it quits by mid-session.

Economic data was relatively mixed. Personal income and spending data suggested that inflation remains under the radar. In fact, the U.S. savings rate rose to its highest level in 16 years. Naturally, money saved and not spent slows the velocity of funds flowing through the economy and will work against price pressures. The news was bond friendly but the University of Michigan's consumer sentiment kept a cap on the buying. According to U of M, consumer confidence has ticked higher in the most recent month to land the index at 70.8.

On a side note, the Wall Street Journal, one out of four defaults on mortgage loans is "strategic". Homeowners than can afford to pay are opting not to pay in order to alleviate the hardships that come with being upside down on a mortgage. This is important because the government is attempting to address cash crunch issues in the housing market they are failing to address the negative equity epidemic. I am not saying that they should or shouldn't, but that it is important to realize that the unintended consequences of political decisions will continue to resonate throughout the economy for some time to come. From a fundamental standpoint, it seems that the safety of Treasuries could remain attractive to risk adverse investors for the time being.

With that said, in the near term we could be in the process of forging a temporary high in bonds and notes. Yesterday we mentioned that we liked the idea of selling the 124/125 calls on continued strength. Our clients were able to sell the August Bond 124 calls today for 20 ticks. If you would like to play it a bit safer, you may want to hold out for the chance to sell the 125's for similar pricing.

We see strong resistance in bonds near 119'17, but wonder if we will even see that high. Note traders should look for resistance near 116'25. The 5-year note could be getting toppy near 115. If you happen to have the 5-year note trade recommended last month, we recommend getting out at or near current levels with a small loss. We may even consider recommending a short position depending on how things look early next week.



**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.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)
• June 10 - We rolled the July 10 puts from the 112 puts to widen the strangle, we gave up about 41 ticks in premium to do it.
• June 12 - We recommended that our clients buy back the 109 puts for 8 ticks.
• June 15 - We recommended that our clients (with this version of the spread) buy back the 110 puts for 8 ticks.

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

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'25
• June 4 - We recommended readers with this position to purchase a 114 put for insurance, hopefully if you have this trade on you were able to do so. Doing this would limit the risk on the trade to approximately $1,500 before commissions and fees.

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.
 
The Bond Bulletin By Carley Garner

July 1, 2009

If you like this newsletter, you will love "Commodity Options". Look for great deals on Carley's book through Amazon!

Treasuries mixed ahead of data and holiday

Bond and note futures traded mixed as traders spent the day squaring positions ahead of the long holiday weekend and tomorrow's non-farm payrolls data. The report is typically released on Friday but the government has adjusted the release date in observation of the 4th of July and the fact that the U.S. markets will be closed (for the most part). I can remember a few occasions in which market moving economic announcements were made on days in which the NYSE was closed, but various futures markets were open for abbreviated sessions. It typically isn't an ideal trading environment, luckily Friday won't be such a case.

Today's trade was a roller coaster of emotions for those with Treasury positions on. Although a relatively narrow range, intraday trade was highly volatile. Some of this was at the hands of the spurts of economic data hitting the airwaves.

Early this morning, ADP announced their prediction of a draw of 473,000 jobs in the U.S. economy. Later we heard that construction spending was slightly lower than anticipated but the ISM manufacturing index was a little higher; pending home sales also saw a minor improvement. In a nutshell, the news was mixed and released bits at a time to create a hotbed of indecisive trade.

Also adding to the day's uncertainty, Reuters reported a story claiming that China wants to rekindle talks of a replacement reserve currency at the G8 meeting. The news send the dollar lower and the bonds followed. Chinese concerns over the health of the dollar may eventually lead to liquidation of their massive U.S. debt holdings. If this happens, the Fed's Treasury buying program will be nearly powerless.

As it turns out, our market analysis played out relatively well over the most recent trading sessions. On Friday of last week we mentioned "... we could be in the process of forging a temporary high in bonds and notes." And later added, "We see strong resistance in bonds near 119'17, but wonder if we will even see that high."

Unfortunately, the picture isn't so clear from here. Overall, I still feel like Treasuries can go much higher in the coming month or months. However, the recent rally has been swift and significant resistance remains in the mid 119'15's in the long bond. I will refrain from making any bold calls until later next week, when some liquidity comes back to the marketplace. However, my best guess is that we could be in store for a test of the 119'16 resistance area.

We also noted resistance in the 10-year note last week near 116'25, which held nicely. It now seems like we could be headed for the 117 area. Likewise, we think that the 5-year note could see the mid 115's soon.

That said, we don't recommend trading until next week (unless of course you just can't help yourself). Chances are that most of the traders still involved in the markets, will be long gone soon after the employment report in the morning.

Yesterday we mentioned that we liked the idea of selling the 124/125 calls on continued strength. Our clients were able to sell the August Bond 124 calls today for 20 ticks. If you would like to play it a bit safer, you may want to hold out for the chance to sell the 125's for similar pricing.

We see strong resistance in bonds near 119'17, but wonder if we will even see that high. Note traders should look for resistance near 116'25. The 5-year note could be getting toppy near 115. If you happen to have the 5-year note trade recommended last month, we recommend getting out at or near current levels with a small loss. We may even consider recommending a short position depending on how things look early next week.

If you have missed this newsletter in recent days, we apologize for the inconvenience. Unfortunately, we have limited time and sometimes have to prioritize. Keep in mind that clients of DeCarley Trading were, and are always, welcome to contact us for guidance above and beyond this newsletter. If you aren't already trading with us, perhaps you should be.



**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.

June 26th - We recommended that our clients sell the August Bond 124 calls for 20

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.





*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.
 
The Bond Bulletin By Carley Garner

July 2nd, 2009

If you like this newsletter, you will love "Commodity Options". Look for great deals on Carley's book through Amazon!


Treasuries extend rally, long bond 120?


Painfully light volume and slightly bullish news was all that it took for the Treasury bulls to retest recent highs. A horrid, but better than expected, employment report prompted moderate safe haven buying across the curve but the momentum wasn't as swift as many would have thought given weakness in equities.

The session was plagued with light volume, but that isn't a surprise. Hopes are for a return of liquidity come Monday morning, but my guess is that things will remain quiet until mid-week. That said, we are still in the midst of the summer doldrums and at the tail end of some of the most volatile markets in history. The real trading volume will take several months and maybe even years to return to the marketplace.

Non-farm payrolls were surprisingly close to ADP estimates. Perhaps ADP has gotten better at forecasting...? According to the government, the U.S. economy lost 467,000 jobs last month and the unemployment rate ticked up to 9.5%. It seems that we are well on our way to double digits.

Putting a bit of a pinch on the rally was news of the next round of government issues. The Treasury announced that it will sell $35 billion in 3-year notes, $19 billion in reopened 10-year notes, $11 billion in reopened 30-year bonds and $8 billion of the 10-year inflation indexed notes. Although foreign demand for U.S. issued debt has been strong, investors may be getting "saturated".

It seems as though the long bond is headed toward 120 and should experience a moderate pullback from there. One the same token, we are now looking for a move to the mid-117's in the 10-year note. The 5-year note met our upside expectations and we have now turned bearish.

Yesterday I recommended not trading today, unless you couldn't help yourself. I guess we fell into that category. We had been waiting for weeks for the 5-year note to reach the mid-115's. Clients were recommended to sell futures near 115'15 and buy a protective call at a strike price of 115.5 or 116 depending on how much they were willing to risk etc. In both cases, the trade has limited risk in the amount of the premium paid plus or minus the difference between the futures entry and the strike price the call option. This is a strategy that we covered in our "Trade Like a Girl" article in SFO magazine and PFG webinar. Visit our websites to view an archive of the class. You can also read more about this strategy in my book, "Commodity Options", which is available through all major book outlets.

Oops, there was a mixup in yesterday's newsletter in which part of the newsleter written on June 26th, bled into Wednesday's commentary. We apologize for the confusion that this may have caused.

Enjoy your holiday weekend!



**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.

June 26th - We recommended that our clients sell the August Bond 124 calls for 20

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

July 2 - Clients were recommended to sell the 5-year note near 115'15 and purchase either a 116 call or a 115.50 call for insurance. The trade offers limited risk with unlimited profit potential.

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.




*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.
 
The Bond Bulletin By Carley Garner

July 7th, 2009

If you like this newsletter, you will love "Commodity Options". Look for great deals on Carley's book through Amazon!


Treasuries undecided


Bonds and notes waffled on both sides of unchanged in Tuesday's session as the bears focus on supply and the bulls argue a flight to quality. In the end, the day's trade was a relative wash.

Light volume likely played a big part in the day's price swings. After being under pressure in early trade, Treasuries rallied back in anticipation of a 3-year note auction, but then pared gains on post-auction trade. Demand for the government issued notes was strong, but the yield of 1.519% paid to buyers was at a higher than expected. There was a 54% indirect bidder participation, which suggests that foreign investors continue to like the safe haven of Treasuries.

In the absence of economic news, equities have once again become the primary force behind price moves in the bond pit. Equities have struggled in recent weeks and are approaching significant support areas and it could be "make or break" time. For instance, the S&P must hold the mid to low 870's to avoid a sweeping move to the 850, and possibly even 840 area. Should the mid-870's be seen in the S&P bonds and notes should get a lift. The dollar on the other hand, offers little directional help. The September index has been range bound for weeks, with little indication of the next move.

Treasuries are simply too quiet; we don't expect this to last long. It seems as though the long bond is preparing for another large rally. If you have bearish positions in this market I recommend playing it close to the chest. I see potential for the September 30-year bond to see prices just under 121. This rally likely won't happen should equities hold their ground, but my analysis suggests that it is a real possibility. That said, if it does happen it should be a great time to sell calls and/or buy puts. Aggressive traders may even want to execute a bear put spread with a naked leg. This involves selling a call, buying a put and then selling a distant put to pay for the trade. If you are interested in learning more, check our websites for free articles or pick up a copy of "Commodity Options" published by FT Press.

We have been continually noting the mid 117's in the note as a potential upside target, we are now thinking a bit higher from here. Look for just under 118 for an opportunity to be a bear. If you are following the 5-year note trade below, I hope that you purchased the call option as insurance as we suggested. It seems like we may be a little early to catch this move. I would prefer not to see it, but 116 looks like the next stopping point. If you don't like the trade, you can get out or sell a 115 put to bring in about $500. It this will basically create a trade in which it is hard to lose money, but hard to make it to....but breaking even may not be a bad thing.


**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.

June 26th - We recommended that our clients sell the August Bond 124 calls for 20
• We recommend buying this back for 6 or less.

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

July 2 - Clients were recommended to sell the 5-year note near 115'15 and purchase either a 116 call or a 115.50 call for insurance. The trade offers limited risk with unlimited profit potential.

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.





*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.
 
The Bond Bulletin By Carley Garner

July 10th, 2009

If you like this newsletter, you will love "Commodity Options". Look for great deals on Carley's book through Amazon!


Again...What a difference a day makes for Treasury trade


Treasuries erased yesterday's losses; however, some analysts are questioning the fact that the rally happened on light volume and likely with end of the week position squaring as a contributing factor.

Bond and notes were moving higher in technical action ahead of the day's major news event, the Michigan Sentiment and the rally continued in post-announcement trade. The University of Michigan's sample of the population only accounts for about 300 individuals in prominent financial standing. Therefore the miss in expectations wasn't taken lightly by bond traders. The headline number was reported at 64.6 despite consensus estimates of a little over 70. Keep in mind that the prior reading was 70.8.

Despite today's sharp rally, we are wondering whether Treasuries can continue higher from these levels. We still feel like there is plenty of room for this rally to move but also feel like things have progressed too far, too fast. We will continue to look for weakness in the coming days. However, the fate of Treasuries is heavily reliant upon the direction of crude oil. Yes, I said it...crude oil.

The sharp decline in the energy markets has been made on the premise that speculators have lost faith in the economic recovery. The unsettling pessimism in crude has, by osmosis, made its way into equities and in turn has been a major contributing factor to the Treasury rally.

I am not an energy expert, but my gut tells me that crude prices are dramatically oversold and should be approaching significant support areas. A reversal, albeit temporary, will take the selling pressure off of equities and should trigger a Treasury correction. We haven't completely given up on our downside targets of about 117'14 in the long bond, 116 in the 10-year note and 114'25 in the 5-year note.



**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.

June 26th - We recommended that our clients sell the August Bond 124 calls for 20
• We recommend buying this back for 6 or less.
• July 8 - We recommended re-selling or adding on to this position near 27 to 30 ticks.

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

July 2 - Clients were recommended to sell the 5-year note near 115'15 and purchase either a 116 call or a 115.50 call for insurance. The trade offers limited risk with unlimited profit potential.

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.






*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.
 
The Bond Bulletin By Carley Garner

July 13th, 2009


If you like this newsletter, you will love "Commodity Options". Look for great deals on Carley's book through Amazon!


Chop, chop, chop


Today marked the fourth consecutive session in which the day's trading range was large, highly directional, and yet overall directionless. Since Wednesday of last week, the market has had big up days followed by big down days but little progress has been made in either the bull camp, nor the bear camp.

Traders seemed to all be shrug off the fact that last week was the first time in history that the Treasury held four auctions in a since week. Contrary to six weeks ago, supply concerns are no longer in the forefront of the minds of traders. Instead, they are looking toward the stumbling economy and the consistent demand for Treasury securities. Don't forget that the June employment data is still resonating through the markets and the fact that Vice President Joe Biden admitted that the administration had underestimated the severity of the economy. Also, if Nouriel Roubini was right in saying that, "The June employment report suggests that the alleged 'green shoots' are mostly yellow weeds that may eventually turn into brown manure"; this rally could have some room to move higher in the long run.

In the near-term, however, it seems like the market could be in store for another day or two of back and filling trade. On Friday we predicted a bond market turn around should equities and crude oil trade higher. We were right in two of three markets but if crude bounced the way that we think that it could, we may see some follow through selling in Treasuries. We have revised our downside targets to 118 in the 30-year bond, 116'20 in the 10-year note and 115 in the 5-year note.


**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.

June 26th - We recommended that our clients sell the August Bond 124 calls for 20
• We recommend buying this back for 6 or less.
• July 8 - We recommended re-selling or adding on to this position near 27 to 30 ticks.

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

July 2 - Clients were recommended to sell the 5-year note near 115'15 and purchase either a 116 call or a 115.50 call for insurance. The trade offers limited risk with unlimited profit potential.

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.




*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.
 
The Bond Bulletin By Carley Garner

July 15th, 2009

Sign up for a free online webinar tomorrow to discuss Commodity Options vs. Stock Options, and other topics in Carley's book at pfgbest.com.


Bonds break down, but support looming


Bonds and notes were hit hard on a continuation of the equity rally, and liquidation in anticipation of this afternoon's release of the Fed's minutes. Also weighing on Treasuries was a significant downdraft in the greenback. However, going forward we wonder if this move will last. After all, seasonal tendencies point toward supportive Treasury prices and equities may be facing a significant technical barrier.

On the inflation front, yesterday's PPI numbers showed a significantly larger jump in price pressure than was expected. Likewise, this morning's CPI was reported at an increase of .7%, a little hotter than anticipated. Additionally, the FOMC minutes mentioned that "While most members did not see large scale purchases of Treasury securities as likely to be a source of inflation pressures given the weak economic outlook, public concern about monetization could have adverse implications for inflation expectations."

Hopefully, the state of Michigan isn't an indication of things to come for the U.S. economy. The state suffered an unemployment rate of just over 15% in the month of June. I am not convinced that the U.S. will see similar numbers, but I do think that the Treasury market will refocus on the sluggish economy and recover from the current correction...at some point.

The long bond dropped a little sharper than we thought that it might. Our first target was 118 and at the time of this email the September bond futures were trading closer to 117. It is too early to tell if the overshoot was due to light volume, or we are actually headed even lower...114'25 is the next stopping point. The note on the other hand, has reached our target of 116'20 as noted in Monday's newsletter and we can't help but feel like we could see a bounce from these levels. Similarly, our target in the 5-year note of 115 has been achieved (close enough).


**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.

June 26th - We recommended that our clients sell the August Bond 124 calls for 20
• We recommend buying this back for 6 or less.
• July 8 - We recommended re-selling or adding on to this position near 27 to 30 ticks.
• July 25 - If you followed this trade, you should be out with a nice profit. If you are still in, don't push it!

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

July 2 - Clients were recommended to sell the 5-year note near 115'15 and purchase either a 116 call or a 115.50 call for insurance. The trade offers limited risk with unlimited profit potential.

July 14 - Some clients sold puts against the down move to reduce the delta of this trade

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.




*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.
 
The Bond Bulletin By Carley Garner

July 20th, 2009

"I'm not even kissing up when I say it's about the best book on option trading I've read." ~ Aaron James, Eastside Financial Group in regards to "Commodity Options" now available through all major book outlets


Treasuries bounce on technical buying


Although the days data was nearly as thin as the trade, Treasury speculators were placing bets on higher bonds and notes in the coming days. Most of the buying came before and immediately following a 3 and 6 moth bull auction. As has been the trend, U.S. backed debt is still in demand.

The Treasury auctioned $32 billion in 3-month bills at 0.19% with a bid to cover of 3.35 and another $31 billion in 6-month bills at .285% with a 3.60 bid to cover. Investors don't seem to be turned off by the next to nothing yields but as paltry as they are, it wasn't too long ago that Treasury buyers were willing to pay a yield in order to have the privilege of the government's AAA rating.

Leading indicators was reported better than expected at a gain of .7%. Analysts were looking for .5% while the previous reading was 1.3%. Although the news was bearish, the market seemed to have already priced it in the data before it was released.

Corporate earnings have been generally positive, and therefore equities have managed to force their way higher. Naturally, this has put pressure on bond and notes but both markets seem to be nearing a near-term turning point. Even so, picking the apex in any market can be a challenging task and there is no way to ensure that we are right about the market's direction therefore traders should give themselves ample amount of room for error. For instance, this morning we liked the idea of selling August puts against the September 30-year bond in the 109 and 110 strike prices. The 109 could have been sold for 23 or 24 ticks while the 110 may have collected a little over 30.

In Friday's newsletter, we mentioned strong support at 115'20 with the mid-115's possible. So far, this assumption has held true. Nonetheless, if the upside in Treasuries is going to continue we will need to see some back and filling in the equity market. If this is the case, I don't see meaningful resistance in the long bond until we reach the mid-118's.

The 10-year note needs a close above 117 in tomorrow's session to confirm the recovery. If this is the case, we could see 119 again.




**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.






*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.
 
The Bond Bulletin By Carley Garner

July 21st, 2009

"I'm not even kissing up when I say it's about the best book on option trading I've read." ~ Aaron James, Eastside Financial Group in regards to "Commodity Options" now available through all major book outlets


Wild ride but higher

The session started off with an overly negative tone, but it didn't last long.
The lack of economic news paved the way for a Bernanke taking the stage in the bond pit. His views of tame inflation for the foreseeable future prompted bond and note buying to push the futures market to our upside target in the long bond.

The buying spree was aided by Fed buying in the 2016 and 2019 maturities; the central bank purchased $7.0 billion of the $18.502 that dealers were looking to unload. On a percentage basis, this was a much more aggressive purchase as has been seen in the past. This comes after last weeks' message from the Fed in which it appeared that the quantitative easing policy had a limited and minimal life span. If you recall, the minutes of the most recent meeting suggests that most Fed members doubt that the purchase of the Treasuries own securities would have little impact on long-term interest rates.

The volume was noted as being lackluster, and may have been exaggerated by the running of buy stops. However, it is difficult to deny the bullish tilt. We remain overall bullish. In fact, we think that a close over 118'15 in the coming session will lay the ground work for another retest of the recent highs near 121 and possibly even the mid 123's within the next month or so if the equity rally fails.

Keep in mind that the seasonal tendency for bonds and notes points higher throughout the remainder of July. Come August, the market tends to see an even more bullish tone. Of course, seasonals aren't fool proof but I wouldn't be willing to bet against them often.

If you are following yesterday's recommendation to sell puts against the 30-year bond, we like the idea of taking a quick profit. The 109's could have been sold yesterday for about 23 ticks and bought back today for about 9.

In yesterday's newsletter, we mentioned the next meaningful resistance in the 30 year to be in the mid-115's which happened to be the highs of the session. This leaves us relatively neutral in the next day or two but it seems as though a close above 115'15 could mean a continued rally.

We also mentioned that a close above 117 in the 10-year note may lead to 119, and it seems that the market is well on its way.



**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.

July 20 - We recommended to sell the August 109 puts for about 23 ticks
• July 21 - We recommended to buy back the August 109's for about 8 ticks, a fill at 9 was possible today.

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.





*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.
 
The Bond Bulletin By Carley Garner

July 27th, 2009

"I'm not even kissing up when I say it's about the best book on option trading I've read." ~ Aaron James, Eastside Financial Group in regards to "Commodity Options" now available through all major book outlets


Treasuries bogged down by supply


Better than expected housing starts combined with record debt supply kept Treasuries under pressure. Yields on the benchmark 10-year note rose to their highest level in about a month.

The U.S. Treasury is slated to auction $115 billion in notes this week. The first on deck was this afternoon's reopen of the 20-year TIPS which saw a 2.5% yield on a bid to cover of 1.92 and a 54% indirect bidder take in the last offering. Today's serving of 20-year TIPs was in the amount of $6 billion and was met with a healthy amount of demand. The bid to cover came in at 2.27 but the indirect bidders only accounted for 47.8% of the action. Keep in mind that indirect bidders are mostly assumed to be foreign; while demand from overseas was healthy it was a little less than what we have been seeing.

On Tuesday, investors are expecting the sale of $42 billion in 2-year notes, $39 billion in 5-year notes on Wednesday and $28 billion in 7-year notes of Thursday. Many analysts are weary of the ability of bonds and notes to quickly recover from such a massive amount of supply regardless of what the chart may suggest.

We feel as though supply concerns, although dominating trade, are built into pricing but it is up to equities to give life to bonds and notes. Without a stock market correction, it will be difficult for Treasuries to find buyers.

Weakness in the buck is also working against Treasuries. It seems as though the dollar index may be headed toward a test of support near 77. If this is true, the currency market could temporarily bring bonds and notes lower in the near-term but we feel like intermediate-term prospects are favorable.

Also putting pressure on interest rate products, new home sales came in much higher than analyst estimates at 384k; the previous reading was 346k and expectations were for about 350k. However, some analysts point out that despite higher sales, prices continue to weaken. This suggests that sales are the product of discounting as opposed to a strengthening market.

We continue to be relatively neutral in the near term but feel like there could be a great buying opportunity at lower prices. Nonetheless, we see support just under 115 in the long bond and again near 113'20. Resistance should be found near 116'14 and again at 118'04. On our most recent newsletter, we noted support in the 10-year note near 115'15 and this continues to be the case. However, we cannot rule out a move to just under 115 before a reversal can occur.




* 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.

July 20 - We recommended to sell the August 109 puts for about 23 ticks
• July 21 - We recommended to buy back the August 109's for about 8 ticks, a fill at 9 was possible today.

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
[email protected]
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
- Commodity Broker Redefined



*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.
 
The Bond Bulletin By Carley Garner

July 29th, 2009

"I'm not even kissing up when I say it's about the best book on option trading I've read." ~ Aaron James, Eastside Financial Group in regards to "Commodity Options" now available through all major book outlets


Rough auction weighs on bonds


Treasury trade pared early morning gains following a lackluster 5-year note auction but the Fed Beige book was the story of the day. Erratic stock trade seemed to go unnoticed but should keep a floor under pricing.

The Treasury auctioned $39 billion in 5-year notes at a higher than expected rate for 2.689% and a bid to cover of only 1.92. This was a far cry from the previous outing that saw a 2.58 bid to cover. Additionally, the indirect bidder participation accounted for only 35.7% of the demand. If the auctions continue to see declining demand, the government may have to tighten its belt as borrowing costs tick higher.

As significant as the previous auctions have been, the "real deal" will be tomorrow's 7-year note offering. The Treasury plans to sell $28 billion, and the markets demand may be a good indicator of how well the size of such sales are being absorbed.

The Fed bought $2.999 billion of the $11.707 billion offered by dealers. They have now purchased nearly $220 billion of the $300 billion slated to be depleted by the end of the summer.

We are still bullish in the intermediate term but aren't ready to pick a bottom just yet. Perhaps, tomorrow's auction will provide the opportunity that we are looking for to be bullish at better levels. We see support in the long bond near 114'15 then again just under 114. Note traders should continue to look for support near 114'15, but we think that 114 will be seen. The 5-year note is becoming attractive from the long side but we do see the possibility of a little under 114 should tomorrow's auction falter.

Oops, there was a typo in yesterday's newsletter. It should have read support in the 10-year note at 115'15 and 115'00 rather than 114'15 and 114'00. We apologize for the confusion.





* 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.





*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.
 
July 31st, 2009

"I'm not even kissing up when I say it's about the best book on option trading I've read." ~ Aaron James, Eastside Financial Group in regards to "Commodity Options" now available through all major book outlets


Overflow buying from yesterday's 7-year note auction


Economic data was mixed and equities held their ground but Treasuries managed to muster up enough momentum to stage an impressive rally. It seems as though the short squeeze has begun...and seasonal strength may eventually take this rally much higher than many are anticipating.

The second quarter advanced GDP was reported as being better than expected at a negative 1%. Most were looking for a draw of 1.5%, but it was a downward revision in the first quarter figure that prompted bond buying. Also helping the bull case was a tick higher in the inflation components of the report.

It seems to me that the day's gains can be more reasonably attributed to a continuation of the market's sigh of relief following the 7-year note auction. After poor showings in the 2 and 5-year note space, the market had been anticipating the worst.

Unfortunately, we let the uncertainty over the auction and putting too much faith into the negative correlation between stocks and bonds to get in the way of our bullish stance. It appears as though we may have missed the low in terms of our guidance. However, if seasonals have anything to do with it, this rally could have room to run.

Look for digestion early next week that could see support near 117'26 in the 30-year bond and 116'16 in the 10-year note. However, the note will need to see a close above 117 on Monday to keep the rally alive. Resistance in the 5-year note comes in near 115'17, we will need to get a close above this area early next week to see some follow through buying.

Sorry so short, enjoy your 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. 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.






*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.
 
The Bond Bulletin By Carley Garner

August 5th, 2009

Check out IndianaGrain.com (Indiana Grain Company, LLC: Blogs - Carley Garner Knows Her Options) for the latest review of Carley's book, "Commodity Options"!


Choppy trade builds suspense over non-farms



The Fed was on the buy side again today; they purchased $7.248 billion of the $17.913 offered by dealers in the 2013 to 2016 range. Also helping the early morning market bid, the payroll firm ADP announced that it is predicts that the U.S. economy lost about 371,000 jobs last month. This was a little less than expected and seemed to have put traders on their toes going into Friday's numbers. Nonetheless, the buying frenzy eventually dried up leaving Treasuries well into negative territory by afternoon trade.

Unlike the ISM manufacturing data released earlier in the week, the ISM services index was a slight disappointment. In fact, the report suggests that the service sector contracted more last month than it did in the previous.

At first, the market seemed to shrug off the Treasury Department's announcement that it would be auctioning $75 billion in notes and bonds next week. Perhaps the success of last week's 7-year note issue is still fresh in the minds of traders. However, as the day progressed the market made its way considerably lower.

Treasuries have been overly choppy, but the large up and down days haven't given way to a clear direction. This makes for a difficult trading environment but Friday's employment data may be what we need to get the market back on course. For now, we prefer to wait until the employment situation is known before trying to speculate on the next move.

Going into Friday's numbers, we like the idea of being bullish near 114 in the 30-year bond and just under 115 in the note. At which point it may be an opportunity to execute long futures, short puts or a combination. Aggressive option spread traders may look to buy a call near the money call, sell an out-of-the-money put and then sell an out-of-the-money call. The result is a fast paced option spread that is versatile in terms of adjustments.

We mentioned that we liked the upside in the 5-year note below 114 and the market looks to have moved higher without us. However, there may be an opportunity to be bullish this market after the employment data Friday morning. Stay tuned for better price action.

* 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
[email protected]
1-866-790-TRADE
Local : 702-947-0701

Stock Index and Bond Futures Trading
- Commodity Broker Redefined



*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.
 
The Bond Bulletin By Carley Garner

August 7th, 2009

Check out IndianaGrain.com (Indiana Grain Company, LLC: Blogs - Carley Garner Knows Her Options) for the latest review of Carley's book, "Commodity Options"!


"Less bad" jobs data, weaker Treasuries


Treasury yields soared following a better than expected employment report. Once again, the yield in the 10-year note seems to be approaching 4% and the 30-year bond reached the 4.64% area.

Although the job losses experienced last month would have been considered a disaster a few years ago, it seems like a blessing today. The change in non-farm payrolls came in at a negative 247,000 as opposed to the expectations of a 325,000 decline. As bad as the numbers are, they are a far cry from the loss of 600,000 plus suffered earlier this year. The unemployment rate also improved to 9.6%.

Also pressing on bond and note prices, President Obama claimed in a speech earlier today that the worst may be over. It didn't seem to add to the day's losses in Treasuries but it did fend off any chances of a recovery. Nonetheless, while the bond market was a bit reluctant to take the President at his word, equities had faith in the idea.

Next week will be data intensive. We will hear the most recent inflation figures, trade balance, retail sales and consumer sentiment.

Yesterday we mentioned the idea of an early morning sell-off on the announcement followed by a recovery. However, trade became heavy on the numbers and never recovered. On the other hand, the equity rally remained firm and remains highly directional. This may point toward some follow through of Friday's move into early next week. Therefore, although our objectives of just under 115 in the note, under 114 in the 5-year and the mid-114's in the 30-year bond (almost), it seems as though there may be a little room for the market to move on the downside. We would like to wait until Monday to see how things play out but in the meantime the next support lies at 113'20 in the long bond and 113'14 in the note.

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. 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
[email protected]
1-866-790-TRADE
Local : 702-947-0701

Stock Index and Bond Futures Trading
- Commodity Broker Redefined



*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.
 
The Bond Bulletin By Carley Garner

August 11th, 2009

Check out IndianaGrain.com (Indiana Grain Company, LLC: Blogs - Carley Garner Knows Her Options) for the latest review of Carley's book, "Commodity Options"!


Warming up with the 3-year auction


After a slow start to the news week, traders were able to gnaw their teeth on this afternoons 3-year note auction. However, with the 10 and 30-year auctions and the FOMC interest rate decision looming, the market is bracing itself for volatility.

Today's auction went relatively well; $37 billion in 3-year notes were met with a bid to cover of 2.89 and a lower than expected yield of 1.78%. Additionally, foreign buyers stepped up their game; the indirect bidder participation was 62.5%.

Much of the recent buying can likely be attributed to short covering ahead of event risk but that doesn't mean that the move won't continue. I don't see any significant resistance in the long bond until 118'18 but 121 doesn't seem unlikely in the coming week or so. I have been noting seasonal strength during this time of year and caution that fundamentals are often overlooked. Accordingly, traders should hold an upside bias. That is not to say that the short side of the market is off limits, but traders must be patient in their entry to reduce the odds of being caught off guard. Meanwhile, the mid-116's are pivotal for the note. It will likely take a close above 116'18 to keep the bulls in control of the immediate future. Next resistance lies at 117'20.

Futures traders, keep in mind that just because we don't put daily recommendations out on this newsletter doesn't mean that we can't help you with different and/or more aggressive strategies!

I apologize for the brevity, but I am a bit short on time. My second book is in the production stage and it has me working around the clock. I figure that if the markets don't have to sleep, neither should I!




* 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
[email protected]
1-866-790-TRADE
Local : 702-947-0701

Stock Index and Bond Futures Trading
- Commodity Broker Redefined



*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.
 
The Bond Bulletin By Carley Garner

August 14th, 2009

"This book provides a realistic look at trading commodity options without the textbook theoretical approach trotted out in many options trading books. It is a valuable book for all option traders." ~ Your Trading Edge Magazine, in reference to "Commodity Options" written by Carley Garner



Tepid inflation sparks bond and note rally



Signs that consumers are doubting the fate of the economy and news of stagnant inflation turned on the green light for Treasury buying. In addition, the lack of evident price pressures ensures that the Fed will remain on hold when it comes to monetary policy.

Core CPI was reported to be exactly flat despite analyst expectations for a slight increase but the headline number did suggest that prices ticked slightly higher last month. The news wasn't necessarily Treasury bullish but it does alleviate some inflation concerns motivating the bears...at least for another month. However, the University of Michigan Sentiment dropping nearly three points from last month was a large disappointment and undeniably supportive to bonds and notes.

Helping price move higher, the U.S. dollar is holding its own against the Euro and the Pound. It seems logical that bonds and notes move together as they both represent, in some form or another, flight to quality interest. However, gold has been struggling to maintain such composure.

Coming into the session we were looking for a continuation of the rally to 118'22 and 117'20 in bonds and notes respectively and some type of afternoon weakness. We now realize that our targets were overly conservative but overall the day's trade was relatively characteristic of a Friday.

Light volume and week end trade makes Monday a difficult speculation. We are looking for the long bond to see 121 again sometime soon but we can't rule out a retest of 117 before the surge higher continues. Likewise, we think that 119 is possible in the note but wouldn't chase the markets higher. Look for weakness to the mid-116's. That said, we will likely be short-term bearish should our upside targets be met.

Futures traders, keep in mind that just because we don't put daily recommendations out on this newsletter doesn't mean that we can't help you with different and/or more aggressive strategies!

* 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.








*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.
 
The Bond Bulletin By Carley Garner

August 19th, 2009

"This book provides a realistic look at trading commodity options without the textbook theoretical approach trotted out in many options trading books. It is a valuable book for all option traders." ~ Your Trading Edge Magazine, in reference to "Commodity Options" written by Carley Garner


Treasury bull getting tired?


A weak overnight session in equities paved the way for a continuation of the safety bid in Treasuries. However, as the trading volume faded so did prices. At the time of the day session close, the long bond was nearly a handle off of its early morning high.

The U.S. dollar suffered a similar decrease in interest in the "flight to quality "trade which worked against Treasuries. The September dollar index was trading near 78.53 at the 3 pm Eastern close of the official day session and seemed to remove much of the bullish bond sentiment.

The Fed's continues to burn holes in its pockets as it spends the remaining allocated funds to the Treasury buyback program. The Fed purchased $2.599 billion of the $13 billion plus being offered by dealers with maturities ranging from the early to mid 2020's.

Today was a slow news day, but tomorrow should be a bit more exciting on the data front. The weekly jobless claims is normally a second tier report but has been getting a lot of attention (and a decent reaction) lately. That will be released first think in the morning and a little later will hear about the Philly Fed and leading indicators.

We have been looking for a rally in the long bond to 121, and possibly a bit higher. This morning's high of 120'24.5 was extremely close and leaves me wondering whether or not the near-term highs are in or if there will be another run to our secondary target near 121'20ish. Similarly, we have been calling for the 10-year note to see 119 before turning around and although this morning's rally was a respectable effort, it failed to reach our target. Accordingly, we are cautiously bearish from these levels.

Going into tomorrow, we will be looking for an opportunity to sell call options against strength. Perhaps the October 126's in the 30-year...stay tuned.

I apologize for not sending out a newsletter yesterday, I have been swamped with the production of my second book "A Trader's First Book on Commodities", which is now listed on Amazon. If you haven't picked up a copy of the first, "Commodity Options", it is also available on Amazon at a great price!

* 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.




*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.
 
The Bond Bulletin By Carley Garner

August 21st, 2009

"This book provides a realistic look at trading commodity options without the textbook theoretical approach trotted out in many options trading books. It is a valuable book for all option traders." ~ Your Trading Edge Magazine, in reference to "Commodity Options" written by Carley Garner


Overnight rally but counter-trend Friday


Higher stocks and better than expected existing home sales were too much for the Treasury market bulls. Despite an overnight attempt at a rally, counter-trend Friday ensued and it seems as though the near-term trend may have reversed its course. We are looking for continued weakness in bonds and notes over the next few trading sessions.

Traders have been tabbing the housing market for clues into the recovery simply because that seems to be the source of the economic misery. Accordingly, news of the existing home sales figure coming in at 5.24 million was enough to stop the bond bulls in their tracks. Consensus estimates were looking for 5.00 million and the previous reading was 4.89. Naturally, the number doesn't account for the fact that many sales are the result of heavy discounting. Nonetheless, inventory is moving and that is a positive.

The Fed bought $5.605 billion of the $11.209 agency debt offered by dealers on the day but the big news coming out of the Fed was Bernanke's speech in Jackson Hole Wyoming. According to the Fed Chair, the global economy is starting to emerge from recession and the "fears of financial collapse" have receded substantially. Nonetheless, he expects the recovery to be "slow at first".

Coming into Friday, we were looking for one more extension of the rally slightly above 121 in the long bond and 119ish in the notes. The overnight rally didn't quite reach our targets, but it was close enough for the market. I believe that the 30 year bond will likely correct to the mid-117's in the coming sessions. If I am right about the bond, the note should see the mid-116's. The five-year note could find support near 115.

Unfortunately, we missed our opportunity to sell calls this time around. We have been working orders to sell the October 126 calls for 23 over the last three days, but it wasn't meant to be. We will wait for another opportunity to do so.





* 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
[email protected]
1-866-790-TRADE
Local : 702-947-0701

Stock Index and Bond Futures Trading
- Commodity Broker Redefined



*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.
 
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