US Treasury Futures Report 04/13/2009

 A new chapter in the tug of war regarding Treasury prices appears to be unfolding. On the one hand, the step up in Fed Reserve purchase should put a floor under prices for the medium term as traders realize at certain support levels, short traders will have to contend with Fed Buying. The influence of these purchases could wane as stabilization reenters the corporate debt market. This is being reflected in the CRX Index- a measure of the prices paid to insure debt from default. The index showed that the cost has dropped over two basis points in April. The appearance of exceptional value and improved safety within the corporate debt market should eventually bring back Treasury supply issues to the forefront, as debt holders take an objective look at the long term inflation picture balance sheet of the US government and perhaps begin to ponder the question “If this was a company, how long could it stay in business running like this?” No one entity is bigger than the market.

Technically, June 30 year futures continue to range trade within a narrowing channel, signifying that the chance for a trend breakout is increasing. The market continues to fail on the downside at the 125.12 support level. If this level does finally break, and technically it should, the next downward target for 30 year futures should be 122.17. Resistance should set at 129.13, with significant upside resistance at 131.10.