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July 6th, 2012
The Treasury market has started out with a minimal upward bias on the charts and that isn’t surprising in the wake of generally soft global equity market action overnight. The macro economic view in the marketplace hasn’t improved despite several central bank moves this week. Expectations for the US non Farm payroll result this morning are centered on a +80,000 to +105,000 estimate range but the bull/bear line for Treasuries this morning might actually be round +100,000. The bear camp might suggest that September bond prices are already sitting in the upper half of the last two month’s trading range suggesting the trade is somewhat expecting a supportive data point. There would also seem to be some whisper numbers for a reading moderately above +100,000, but after the last month’s much weaker than expected result, anything patently soft might prompt a sharp spike up move to the highest price levels since mid June. In looking at outside market action, the bull camp in Treasuries has to feel like they have an edge with a long list of physical commodity markets under pressure, equities generally weak and the Dollar is clearly in vogue. One might also note the flow of deflationary readings from international sources overnight. In the end, the expectation of near term US easing seems to have been downgraded from the levels seen early in the week, and that is largely the result of some US data this week coming in slightly better than expected. In fact, the most recent US auto sales data was much better than expected and that has probably served to limit the upside bias in over the last 48 hours. Just for good measure, the bull camp also seems to have caught a slight lift from Euro zone debt news overnight. Some key EU leaders have made comments that seem to countervail a previously expected track toward a tighter fiscal union in the euro zone. Therefore the Treasury market might be seeing a minor measure of flight to quality support off the European debt issue to start today but that focus is likely to be completely overshadowed by the reaction to the US payroll results. Some markets this week have periodically factored in the prospect of easing dialogue from the head of the Fed later today, but a middle of the road reading today, probably won’t bring the Fed off the bench.
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