Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
While we might be giving too much credence to the European economic news overnight, the numbers from that area were markedly better than some expectations and notably better than prior readings and that led some analysts overnight to conclude that adverse weather did serve to weaken activity earlier this year. In other words, adverse weather seemed to hold back the European economy in February and data after that period showed a noted recovery. Therefore, that could lead some to conclude a similar potential economic recovery could be seen in the US, where the Eastern portion of the country (particularly the biggest source of hiring the US government) was impacted by a series of winter storms. Note: Today’s Durable goods and New Home sales reports are still for February and not for March! With a couple Fed members recently suggesting that employment would improve this spring, one begins to get the impression that the next Non-farm payroll, or certainly the one for April will post a noted gain and therefore the recent bullish tilt in Treasuries looks to be challenged in the coming trading sessions.
After a tight consolidation around both sides of 118-00 in the June bond contract recently, that would seem to hint at a slight loss of upside momentum. While we continue to think that residual uncertainty off the US economic outlook in the near term will generally provide the bull camp with ongoing support, we also think that the market is already finding it difficult to put together enough buying fuel to definitively extend the rally that has basically been in place since late December. However, with the market facing another auction leg today and the market yesterday not getting its typical lift off the auction that could mean longer maturities will have to provide even more support prices in the wake of the coming auctions, or some more distinct downside work might be seen on the charts. On the other hand, after seeing the third straight monthly US existing home sales decline in a row yesterday and seeing muted inflation readings last week, one might have expected the bulls to have displayed more dominance over the Treasury market this week.
With $42 billion in 5 Year Notes to be auctioned later today and the poor market reaction to the auction yesterday, the bull camp is in bad need of something weak in the durable goods or new home sales figures or Treasuries could knuckle under and in the process send June bonds back below the 117-00 level. Furthermore, we think that June Notes could easily fall back below 116-24 in the event that any of the US numbers today are better than expected.
Certainly seeing patently weak scheduled data today would catch some players pressing the downside early, but given any additional ammunition from decent data, that could really result in bonds and notes falling back toward the March lows!
