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February 22nd, 2012
Treasuries have recovered from early losses this morning, although prices remain fairly close to yesterday’s new low for the move. Some traders feel that the Treasury market was under safe-haven liquidation pressure during the past 24 hours as recent events in the Euro zone have tamped down interest in safe haven instruments. Optimism from the recent Greek debt bailout deal might have been accentuated by news overnight of a rise in Euro zone industrial orders during the month of December but that news was apparently largely offset by a disappointing private survey of Euro zone industries. However, the industrial orders gain for the Euro zone was the largest gain for 7 months! It is also possible that the markets saw the comments from the Bank of England as a negative factor to US Treasury prices as they saw slightly reduced Euro zone threats, and several members of their Monetary Policy Committee thought that the UK economy might become a little stronger in the near term. Follow through liquidation in the Japanese Yen today might be seen as another sign that safe haven interest is on the wane, as the Yen over the last three years was the penultimate flight to quality instrument! Looking ahead to US trading, the market will be presented with a weekly mortgage application survey but that report might not have much influence on prices. The market will also see two private weekly chain store sales reports but those reports also aren’t expected to be a major source of volatility. However, there will be private survey of Existing Home Sales for January with expectations calling for a slight rise in those figures. That report could have a negative impact on Treasury prices if the figures meet or exceed expectations. Some traders might attach more significance to the private survey of home sales this morning, as some analysts recently have speculated that the US housing sector appears to be forming a bottom. Around mid session, the market will see another auction of 5 Year US Treasury notes. Another element that might drive Treasury prices today is the roll out of the President’s corporate tax reform plan.
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