Morning Interest Rate and Treasuries Report

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August  27th, 2012

Treasury prices have started out with moderate gains this morning, which some traders feel is the result of weaker international equity market action during overnight trading although a recovery in US equities has helped to take prices off of their early highs. The market will probably end up taking some direction from regional Fed manufacturing data that will be released later this morning. However, many in the market are downgrading the importance of the US data released today which in turn has some traders looking ahead towards data due out later this week.

Given the low to high recover in Bonds last week of roughly 4 points and a gain in Notes last week of almost 2 points, other traders feel that Treasuries may have already factored in a moderate portion of the September US easing prospects already. In addition, Treasuries may have benefited again early this morning from fresh easing dialogue from the Fed Regional President Evans speaking in Hong Kong during the overnight session. Noted weakness in Asian equities may have provided an early boost for Treasuries but seeing US equities hold their gains into the NYSE opening could increase the focus on the regional Fed data due out this morning.

Given the vocal support for easing from Fed officials recently, it is possible that any marginally positive US data over the near term could now be generally discounted into the September FOMC meeting. Some analysts think that soaring grain and energy prices are also serving to limit the upside action in Treasuries, which could become an issue for the market in the face of the approaching tropical storm.
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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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