ECONOMIC DATA 01/08/2009 (ALL TIMES EST): 8:30 AM US WEEKLY JOBLESS CLAIMS (540 K). 10:35 AM EIA NATURAL GAS REPORT. 1:00 PM US 10 YEAR NOTE AUCTION ($16 BILLION)
TREASURIES FAIL TO CAPTIALIZE FROM EQUITY SELLOFF.CONTINUED PRESSURE FROM SUPPLY, AUCTION RESULTS.
US Treasury futures closed at nearly unchanged levels. While the markets appear to be settling in before Friday's employment data & earnings, the fact that today's drop in equities did not result in a run into fixed income suggests that concern continues to mount with regards to the supply of debt being offered to the marketplace to fund US led bailouts & stimulus programs. Potential gains in the markets due to a worse than expected ADP employment report were all but negated as the results of a record $38 billion US 3 year note auction followed the pattern of recent auctions of standard government debt-declining interest due to mounting concerns about supply. The 3 year note, which was reissued this past year as a bridge debt instrument that could tie into an optimistic estimate of a recovery, was sold in this auction as a disappointing bid to cover ratio of 2.21 (recent auctions have been sold at 2.40). Yield on the notes was the lowest on record.
Tomorrow's auction of 10 year notes will be watched with equal interest as the $16 billion of debt could meet with further supply concerns, particularly in the wake of the success of the 10 year TIPS (Treasury Inflation Indexed Debt) auction as well as elements of fiscal restraint cropping up such as the scaling back of the 10 Year German Bund auction due to concerns regarding the size of the debt float and its potential effect upon the inflation picture.
Technically, US 30 year futures remain in a narrow channel with little signs of a breakout at this time. Market appears to be putting in a near term support and could trade to an upside resistance level of 133.12, with stronger resistance at the 133.22 level. Downward target level still remains near the 128.04 level.
March 30 year futures settled at 132.22, unchanged. March 10 year futures settled at 124.155, up 4/32nds.