Morning Interest Rate and Treasuries Report

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August 2nd, 2012

Many traders feel that the Treasury market saw yesterday’s events to be negative, as Treasury prices fell back from their recent highs and closed on their lows yesterday. In retrospect, the market saw the Fed’s stance as a sign of some residual positive motion in the US economy. In addition, there may also be a measure of pressure on Treasuries today from the near-term prospect of an easing move from the ECB. However, Chinese economists overnight suggested that the US economy still lacked the capacity for a solid expansion of growth ahead. There aren’t many traders and economists who think that any action from the ECB today will provide a significant and sustainable solution to sputtering economic activity in the Euro zone. Portions of the Treasury market might be a little fearful of the ECB announcement window this morning, but it is possible that the influence of the ECB will be short lived. In fact, expectations of a jump in US initial claims and the proximity of the monthly US payroll report on Friday morning may put the focus of the Treasury market right back on the US economy and away from the Euro zone rather quickly. A private jobs survey released earlier this week came in much stronger than expected, which some traders feel has tempered US slowing fears. There will also be another private employment report released in the early action today, which might begin to set the tone for the Treasury market over the next two trading sessions. Other US reports scheduled today include a private survey of New York-area regional business activity, June Factory orders and some private chain store sales readings. Many in the markets are well aware of a pattern of short lived euphoria in the wake of Euro zone announcements and the release of debt plans, and therefore any Euro focus should quickly give way to US economic news flow.
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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