Morning Interest Rate and Treasuries Report

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March 29th, 2012

Treasuries have posted moderate gains this morning, although prices have remained below yesterday’s highs. Some traders have been a little discouraged by the price action over the last 24 hours, as a negative shift in US and global macro-economic sentiment has not resulted in any notable strength in Treasury prices. In fact, US Treasuries may also have been the benefactor of Fed purchases yesterday and even that support didn’t result in definitive and sustained gains in prices. In addition to a softer than expected US Durable Goods report yesterday, Treasuries were presented with some rather significant weakness in US equities. On the other hand, the market generally felt that US auction results yesterday were disappointing and there has been some rising international opposition to the excessive easing policies in Western developed economies. The Treasury market will be presented with another auction result today in the form 7-Year Notes at mid-session but before the market has a chance to react to that news, the focus will likely to be on US Initial and Ongoing Jobless Claims. While there is a US GDP report due out this morning as well, that will be a third and final revision of that number and the market might not produce a definitive reaction unless that report is significantly below the expected reading of +3.2%. With international equities weaker, Jobless Claims expected to show a minor rise and Treasuries showing positive early price action, there are widespread expectations that the market will hold early strength in front of this morning’s US economic reports. Given the persistent fear of more economic slowing from China and ideas that US Fed policy is currently confusing, many traders are on the lookout for more definitive dialogue coming from Fed Regional President Lacker or perhaps from Fed Chairman Bernanke later on during the session.
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