Archive for December, 2011:


Bond Market AM Update: Buying Dips Into Year End

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MARKET BIAS



* The tactical bias is that of a supportive trader favoring the buying of dips into year end
as it appears as if sellers have left the 2011 building leaving those in need to reach to
get any desired paper. Though we would look to be flat by session’s end and be on
guard for a late session profit-taking sell-off.
* We will continue to look to Europe and its market behaviors for trading cues.
* Look for a 1.94% to 1.85% range in 10s.
* The strategic bias is flat after exiting a 10-year long from 1.953% at 1.916% for 50%
and at 1.897% for 50% for a 4.5 bps profit.
* The curve bias is flat after exiting a 7s/30s steepener from 156 bps at 152.3 for a 3.7
bps loss.


TECHNICAL OVERVIEW





OVERNIGHT TREASURIES


* Bonds little changed overall in very quiet trading
* 30k 10-year futures trade by 06:33 EST
* USTs underperforming EGBs by 3.9bp in the 10yr maturity compared to the previous
London close.
* 10s trade in a range of 1.921% and 1.895% overnight.


OVERNIGHT NEWS RECAP


* Use of overnight ECB facilities rises into year-end
* EUR 17.3Bln borrowed from ECB, EUR 445.7Bln deposited
* Risk of contagion to be under control in 2012 – FinMin Schaeuble
* Spain to implement stringent austerity measure – Rts
* HSBC China PMI for December 48.7 from 47.7 in Nov and 49 in the Flash
* European Credit Indices wider, iTraxx S-16 XOver moves 5bp higher to 752.5bp, Main
index climbs 0.5bp to 172bp.



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