Wednesday, May 13, 2015

Ten Year Treasury Looks Good, But not Rock Solid

Ten year Treasuries firmed yesterday following an overnight route that pushed yields to 2.36%, above the 2.31% high of last Thursday.  Open interest rose in TY by 47K as a result of trade yesterday an amount similarly lost in combination between TU and FV.  Price action formed a bullish hammer and completed a 9th new low without a three session pause, indicating some oversold conditions.
A reference point for today’s settle is 127-11.  A settlement above would indicate that the sell-off on Monday has lost most of its directional sway.  

Bullish minded traders should be encouraged by yesterday’s price action, though understand the bullish implications of that recovery have not been confirmed by trade yet today.  The market is stretched and had absorbed a lot of selling over the last two weeks, but there was good reason for the long contingency to re-evaluate their base assumptions.  

Today we see Retail Sales (Bloomberg survey consensus ‘control group’+0.5) for the month of April and the Treasury auctions $24B of 10 year Treasuries today.  The last time out, the 10 year auction went poorly, but this time, yields are well higher.  


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