Tuesday, April 12, 2016

Treasuries Finding Headwinds from Without

Ten Year Treasuries are slightly (-08/32nds) lower this morning following a slight decline on modest volume Monday.  That decline gave a small nod to the bearish two session ‘harami’ formation of Thursday/Friday. 

There is a tight upward sloping bullish price channel in TYM6 that thus far today appears to be broken.  That channel begins at the March 23rd low.  The advance has found resistance toward the base of the Feb 11th ‘bearish shooting star’ which capped the January through early-Feb extraordinary advance. 

A settle below the above noted channel today (at or below 131-04) would suggest a momentum shift after 8 new highs, suggesting slight overbought conditions, brought the contract toward the February highs.  A higher settle today would be necessary to dispel these bearish concerns.

The CFTC advised Friday that ‘non-commercial’ accounts had moved more strongly to a net short position in 10yr Treasuries.  The 67K addition to ‘net short’ was the largest such move since early March.  So called ‘large spec’ accounts have moved from a net long position of 72,000 then, to a net short of 86,000 at the last reading. 

Below is a look at the JPM Client Survey results of April 11th.  We see that ‘Active’ clients have made a rather dramatic move from a net long to a net short position in the last week while the ‘All’ client shifted to neutral from slightly bullish. 

All Clients
Date  Long Neut Short Changes
04/11  18    64    18      11
04/04  23    61    16       7
03/28  18    64    18       5

Date  Long Neut Short Changes
04/11   20   70     30     30
04/04   50   40     10     20
03/28   30   60     10      0

Finally, there has been additional signs of ‘repair’ priced in oil, gold, equities and other asset classes.  This is a strong headwind against the bullish prospects for Treasury prices. 

Today is an important session as long participants may tire of waiting further gains.      

This has been prepared for informational purposes only, is confidential and may not be reproduced.  It is not from the Research Department or a research report.  It is based on information generally publicly available from sources believed reliable.  No representation is made to accuracy, completeness or returns.  Changes to assumptions may have a material impact on returns detailed.  Prices and availability are subject to change without notice.
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