Morning Interest Rate and Treasuries Report

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August 7th, 2012

While Treasury prices showed some divergent price action yesterday morning to US equities and to the Euro, Treasuries seem to have settled back into a more predictable negative correlation early in today’s session. Some traders feel that the presence of looming US supply starting with today’s 3-year Note auction has applied some additional pressure on Treasury prices over the last 24 hours However, other traders feel that seeing an improvement in sentiment towards the European debt situation is probably the most significant development for the Treasury market today. While a definitive solution remains elusive, many in the market are seeing the current situation in the Euro zone as a positive factor and as a result, financial and banking shares in Europe have managed a rather definitive rally during the past few sessions. As a result, fears toward the Euro zone debt crisis appears to have eased which in turn has reduced the flight to quality demand for US Treasuries. Residual confidence towards the US economy remains in place in the wake of last Friday’s US Non Farm Payroll result. While the Non Farm and Private Payroll numbers exceed market estimates by a wide margin, there have been several reports in the press that the Federal Reserve is moving towards some kind of easing action at their September FOMC meeting. Some US media outlets this morning have suggested that more Fed members are shifting into a “dovish” monetary policy stance now, which has resulted in some minor pressure on Treasury prices during the early Tuesday trading action. The market will also see a series of chain store sales figures released this morning, followed by a Consumer Credit report in the afternoon that is largely expected to see a moderate jump in the use of debt. Some traders see the use of consumer credit as an unhealthy propagation of growth, while other traders see the use of credit as a sign of increased confidence by the consumer.
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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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