US Treasury Futures Report 04/08/2009

US Treasury futures traded higher, but remained within its recent range, as a record $35 billion of US 3 Year notes did not offer any surprises to the market and minutes from the FOMC meeting confirmed the committee was united in its plans to support Treasuries through scheduled purchases of $300 billion. Treasuries also received additional support from buyers seeking shelter from the volatility of equities, especially during earnings season.

The results of the US 3 year note auction were essentially mixed. A strong bid to cover ratio of 2.42 was achieved at the cost of a higher than expected yield than the face or coupon rate (1.385% vs. 1.375%). Non dealer interest was noted as strong, suggesting that this benchmark debt instrument for the recession/recovery period remains well supported. Treasuries remained essentially unchanged after the auction results. Further gains took place after the release of the FOMC meeting minutes from March. The minutes confirmed a united front and unanimous support for the Federal Reserve’s plan to support economic stability by purchasing significant levels of US Treasury Debt.  Gains also held to the upper end of recent ranges as traders and investors seek security ahead of the holiday weekend and equity volatility during the ebb and flow of earnings season.

Technically, June 30 Year Futures show no sign of leaving the nest (or channel). Recent gains measured against 30 and 60 min RSI (Relative Strength Index) suggest that the market may be getting somewhat overbought. Upside likely to find resistance at 128.220. A small correction may take place ahead of the holiday weekend down to a 126.240 support level. Break out support and resistance levels remain at 125.120 and 131.080.