Morning Interest Rate and Treasuries Report

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April 11th, 2012

US Treasuries have started off today’s trading under pressure, which some traders do not find surprising in the wake of the strong upside price action during the prior four trading sessions. With reports that the Chinese central bank may cut their nation’s bank reserve rate requirements, favorable Alcoa earnings news yesterday afternoon and positive initial equity market action, other traders felt that US Treasuries might have been under even more pressure during overnight trading. However, a slight jump in Spanish debt yields overnight, a partially uncovered German debt auction and a tsunami scare in the Indian Ocean overnight has provided a measure of safe-haven support to Treasury prices this morning. While some analysts have already discounted the positive earnings result from Alcoa yesterday afternoon, as a “one off” result, the market has continued to react towards the weaker than expected US March Non Farm payroll result. Many in the market feel that it could take a series of better than expected US scheduled readings, or fresh promises of easing from the Federal Reserve for June bond prices to fall back towards the November through early March consolidation lows. Renewed concerns toward European debt appear to be providing fresh support to Treasury prices this week. Over the short term, the market will probably see some reaction to a speech this morning by Fed Regional President Lockhart, and prices certainly will take some direction from the early afternoon release of the Federal Reserve’s latest Beige Book. While the market will see a weekly mortgage application survey and a US Import/Export price report, neither of those events are expected to have any lasting influence on Treasury prices. With the last FOMC meeting minutes leaving many in the market with a “hawkish” view towards upcoming Fed policy, it is possible that the Fed Beige Book today might reinforce that opinion. On the other hand, it is possible after last week’s Non-Farm payroll result that the Treasury market could become more sensitive to any evidence of slowing from Fed statements.
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