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February 28th, 2012
Treasury prices have started out Tuesday’s session by holding relatively close to their recent highs. While some traders feel that there is a slight “risk-on” vibe in place at the start of this morning’s trading, other traders feel the Treasury market may be receiving some fresh support from news that the European Central Bank temporarily suspended Greek bonds as collateral as well as from news that a major credit rating agency has downgraded Greece’s sovereign debt to “selective default status”. With Morgan Stanley also the subject of credit rating downgrade speculation overnight, many in the market have been surprised to see global equity markets trading mostly higher during the overnight session. Asian equities were thought to have found some support from the Euro zone’s upcoming Longer Term Refinancing Operation, and from ideas of fresh accommodative monetary policy moves by the Chinese central bank. The prospect of a 1% decline in the US Durable Goods number later this morning may be providing additional support for Treasuries today. In addition, expectations for a decline with a private home price survey might be another element that is helping to underpin Treasury prices within close proximity to their recent highs. On the other hand, the market might also see a minor improvement in a private survey of US consumer confidence later on this morning as a negative factor for Treasuries. It is also possible that talk of even more assistance for the US housing sector from a US Federal Reserve official later this morning may apply some fresh pressure to Treasury prices. On the other hand, Treasury prices in general are thought to be garnering some residual strength from ideas that ultra high crude oil prices are likely to diminish consumer spending capacity during the weeks and months ahead. While nearby crude oil prices are sitting almost $2 a barrel below their recent highs, the energy markets have reached these current high levels in spite of slack seasonal demand and relatively high levels of supply. With March bonds yesterday reaching up to their highest price levels since February 3rd, some traders feel the market might need to see distinctly soft US economic data or renewed fears toward the Euro zone debt crisis to add any further support to the late February rally.
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