Monday, May 18, 2015

Treasuries Lower Following Best Double-Tap Since April

Eurodollar and Treasury prices are generally lower save the very front end of the curve in Fed Funds, Eurodollar strips.  Open interest jumped on Friday.  Open interest rose 110K in Eurodollars as the yield curve flattened by 11 basis points throughout the first 6 years.  Elsewhere, open interest rose by 14K in Fed Funds, 7K in TU, 15K in FV and 17K in TY.  The Treasury 5-30 yield spread flattened by 8 bps on Friday, the largest flattening since early February when the curve tested support toward 100 bps.

Light economic calendar today following  Chicago Fed Evans in Stockholm outing where he stayed close to his script of the last many months, suggesting 2016 a better time to start normalization though still expecting growth of 2.5-3% in 2H ’15. 

Ten year Treasury future, lower by 7 tics could be forming a bearish Harami as a result of trade today and Friday.  Recent bullish price action included the bullish hammer on Tuesday, the bullish inverted hammer on Wednesday and the bullish engulfing in the two day Wednesday/Thursday period. The Thursday/Friday strong advances was the first decent back to back gains since Thursday/Friday April 23-24.  Of course, that double tap marked the recent top, ushering in  8 consecutive new low closes. 

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