ECONOMIC DATA 05/12/09: all times EST

8:30 AM US INTERNATIONAL TRADE ($27.5B)

SUMMARY OF DATA 05/08/09

US NONFARM PAYROLL #s (-539,000) US UNEMPLOYMENT (8.9%)

US TREASURIES RALLY BACK ON SHORTCOVERING, SPECULATION THAT FEDERAL RESERVE WILL STEP UP TREASURIES PURCHASES TO SUPPORT LOWER INTEREST RATES.

US Treasuries rallied back after the Federal Reserve resume Treasury debt purchases on Monday. The Fed bought $3.51 billion worth of debt amid speculation that Fed Chairman Bernanke will likely step up the size and frequency of Treasury purchases in order to stem the steepest drop in debt prices since 1994 and defend the low mortgage and interest rate environment deemed necessary to support the national and global economic recoveries.

Treasuries began the session stronger as equities staged a profit taking pullback, led by financials, as the sector was perceived overbought in the wake of the S&P 500 touching near seven month highs. Additional recovery was achieved by Treasuries as the asset class digested last week's revelation by PIMCO, the world's largest fixed income trading fund, had cut back its portfolio allocations of government and mortgage backed securities from 28% to 24% percent. Whether motivated by profit taking or concerns about potential inflation and valuations, it would be surprising for this move to spur additional self offs across the government yield curve until the move reached support where yields became attractive enough to tempt buyers back into the market. In addition, there are no major auctions of new Treasury debt scheduled for the next two weeks. This appears to be alleviating some of the concerns regarding the record supplies of debt-at least for the time being.

Further gains in Treasuries this week may be challenged this week by data releases on US retail sales, industrial production, and readings on inflation (PPI & CPI). Influence from these catalysts could likely challenge the true strength of key technical support and resistance levels.

Technically, June 30 year Treasury futures continue to bounce from support at 119-20. Market should continue higher in near term to initial resistance point of 122-155. Above this level, look for June 30 years to target 123-090 level. Near term support sets in at 120-180, with a break below this level setting up a move toward 119-080.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US M9 (US 30 YRS)

120-140

121-305

120-125

121-140

+1-13.5/32nds

TY M9 (US 10 YRS)

120-135

121-120

120-130

121-085

+29/32nds