Sunday, October 11, 2009

Tech Talk for the 30yr T-Bonds Futures

This market is approching a significant area of support between 119-16 and 118-24. Before it gets there it will retrace back up to near the Key Resistance on the Daily. When it gets there I will consider a short position if other indicators line up.

Last week Tax-Cheatin-Timmy at the Treasury sold another whopping amount of treasuries all along the yield curve. It was said that all of the auctions were well supported, but that may be more "spin." The 30-YR Bond auction in particular didn't go so well. Will this continue or will Helicopter-Ben at the Fed just keep printing money and buying them from the primary dealers?
The 30-YR Bond auction was held last Thursday. When the results were released, the bond market fell apart closing down sharply. That was followed up by another bond route last Friday, thus pushing up interest rates.
What happened to slam the market? The primary dealers must make a bid at the auctions and when the result was announced they discovered that the underwriting bids they submitted were hit and they now own more bonds than they had expected. Oops! They also know that the 30-year sector is the least played by the foreign central bank community so any intervention money which required a home was not waltzing into the 30 year bond. They were stuck. The next step of the process is to sell what you own or to create a hedge by selling something else. In this case it appears that the unhappy holders did a little of each: sell, sell, sell!
Of course treasuries can drop a long way without creating too much of a stir; however, they cannot free fall. The stock market would take notice of that. Although it may have been an isolated 2-day sell off, keep on eye on the treasuries and these auctions for clues of a potential market reversal.

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