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Treasury notes rose on Thursday as traders weighed the supply and demand issues of another $14b auction that had the Fed buying again, after a weekly total of $71b new notes came to market last week from the Treasury department. The 10 year note value had created the biggest decline in two years of trade by reducing in value for seven consecutive weeks. Thirty-year bonds have lost investors over 20% so far this year.
The Treasury created another mass of dollar backed notes for the market and the Fed, to absorb at auction last week, and the move from the Fed to purchase the largest amount up-front that it has done since March 17th tried to set the tone for others to follow. Unfortunately that was not a success in instigating interest and buyers now have two weeks to ponder things before the Fe buying starts again. The 10 year yield moved up last week up to touch 3.31%, the highest this year, but closed out at 3.10% in trade on Thursday.
The Fed continues its short-dollar mandate by buying notes at the fastest rate of knots since the announcement of the $300b six month purchasing spree, with over $100b having already been bought and put into the Fed reserves. The Fed is working hard to support the market, but now needs to take care that interest rates on these notes do not get too far above what is perceived to be the 3.2% target rate.
June delivery values popped higher to $58.62 (+1.0%)close to a five week high, after holding major support at $48.50 last week.
Gold for June delivery closed flat on the day at $926 per ounce. Traders tested and broke a major resistance area at $910 in the process, at the 100 and 50 day SMA area. Bullion held in the SPDR Gold ETF remained unchanged at a record 1,100+ metric tons.