ECONOMIC DATA 01/21/2009 10:30 AM EIA OIL INVENTORY REPORTS. 1:00 PM HOME MARKET INDEX
TREASURIES COLLAPSE ON SUPPLY CONCERNS, RALLY BACK OF LOWS AS FALL IN EQUITIES REVITALIZES FLIGHT TO QUALITY.
US Treasuries traded in a volatile session which seemed in direct contrast to the apparent calm & dignity of the US inauguration ceremonies today. Perceptions swung dramatically today as the two primary catalysts that have been driving the direction of Treasuries had the opportunity to hold center stage in the session. The long end of the yield curve was particularly volatile today. 30 year futures fell over 3 full basis points in the early session on concerns regarding the levels of government debt which the new administration is likely to introduce to a saturated market place to try and fund stimulus programs.
Additional concerns regarding debt levels were stoked by the announcement by UK Prime Minister Brown that Britain will introduce a spending plan designed to support banks & weakened financial institutions in excess of $120 billion. These concerns brought Treasuries down to significant support levels which managed to hold above oversold indicators. This perceived strength, combined with the post inaugural acceleration of the slide in equities allowed for a nearly two basis point rally off of session lows as double digit percentage drops in the financial sector offered no hope for the overall market and spurred renewed buying in Treasuries on Flight to Quality and perceived value with regards to yield.
Technically, the volatility in the markets allowed for a resetting of support levels, with initial support in the 30 year near the 132.25 level. The rebound off this level without entering oversold conditions suggests that a retest to the downside could result in a retest to the 132.20 and 131.05 levels,with upward resistance found near the 134.20 level.
US DEBT FUTURES
US H9 (US 30 YRS)
TY H9 (US 10 YRS)