Morning Interest Rate and Treasuries Report

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August  24th, 2012

Treasury prices have posted another fresh new high for the move during overnight trading, and in the process September bonds have reached up to the highest price levels since August 14th. Many traders feel that weaker global equities and comments from Fed Regional President Evans overnight in Beijing are providing support for Treasures this morning, as well as news from yesterday afternoon that foreign central bank holdings of US Treasuries rose in the latest weekly reports. However, relatively low European sovereign debt yield this morning may suggest that flight to quality demand for Treasuries could remain muted during today’s session. Some traders are surprised that Treasuries are showing the capacity to rally in front of today’s Durable Goods release, as that report is expected to post a gain of 2% to 3%. Reports of a potential return to a gold standard has made little impact on Treasuries, as that type of shift in policy would be monumental and perhaps impossible in the current political climate in Washington. If successful, this would seen as a positive to Bonds and Notes as that type of policy could result in restrictions on government spending but also serve to tie the hands of the Federal Reserve.
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