Morning Interest Rate and Treasuries Report

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August 10th, 2012

The Treasury markets are posting sizable gains this morning, with many traders feeling that prices have clearly benefited from the much weaker than expected Chinese trade data released overnight. Some traders also noted that the market may have begun to recover yesterday once this week’s US auction supply was completed. Not surprisingly, Treasury prices have been strengthened by the shift towards a “risk-off” market environment.

While Treasuries were already finding support from news of further slowing in China, the reluctance of that nation to start up fresh easing measures may have allowed global slowing fears to become entrenched in the marketplace. News that foreign central bank holdings of US Treasuries rose sharply during the first week of August might be another element providing support to Treasury prices this morning. That favorable news might be partially offset by ideas that the US today will see a huge jump in their monthly budget deficit, from $60 billion in June to a deficit of roughly $103 billion in July.

Other elements that might be weighing on Treasuries early today would be rekindled talk of soaring global food prices and increased speculation of a reduction in the Chinese bank reserve requirement ratio. While the US will see US Import and Export prices released this morning that report isn’t expected to prompt a significant reaction from US Treasury prices. In fact, price action in the US equity markets might have a more significant influence on Treasury price action than anything from today’s US economic reports as any extensive decline in US equities might accentuate the fears of global economic slowing that were fueled by last night’s weak Chinese trade data.
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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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