Correlation Strong Between T-bonds and Euro’s Currencies

• August 13, 1999
• Manuel Ochoa

PREVIOUS POSITIONS
Market	Long/Short	Enter	size=2 color=000000>Exit	size=2 color=000000>P/L (per contract)
Sep. 99 T- bonds	Long	113-19	114-02	$468.75
Sep. 99 S&Ps	Long	1285	1309	$6000
Sep. 99 Swiss franc	Long	.6710	.6705	-$62.50

CURRENT POSITIONS (AS OF 8/13/99)
Market	Date	Long/Short	Enter	Stop	size=2 color=000000>Target
Sep. 99 T-bonds	–	Flat	–	–	–
Sep. 99 S&Ps	–	Flat	–	–	–
Sep. 99 Swiss franc	–	Flat			–

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Note: All price levels are approximate.

T-bond futures

The September futures [USU9>USU9] rallied today on a smaller-than-expected rise in the PPI report this morning. But bond futures first made a new low that probably stopped out a lot of bulls. This set the stage for new longs to buy a the lower level. We exited our long yesterday and are now on the sidelines. We were, however, surprised to see the bonds rally this much. Stay tuned for Tuesday’s CPI.

Figure 1. September T-bond futures (USU9), 10-minute bar. Source: Quote.com.

S&P 500 futures

The September contract [SPU9>SPU9] continued to rally today from Wednesday’s low. We exited our longs yesterday because we did not want to risk our open profit ahead of the PPI report. Today’s rally was impressive and should get some follow-through on Monday. Volatility is starting to come down, which should add further support.

Figure 2. September S&P futures (SPU9), 15-minute bar. Source: Quote.com.

Currency futures

The September Swiss franc [SFU9>SFU9] and Euro [ECU9>ECU9] fell today on a stronger U.S. stock and bond market. We exited our long yesterday for a small loss. This market is highly correlated with the bond market right now. There was a great deal of fund liquidation today as stop levels were hit for longs.

Next scheduled update: Monday, August 16, 1999

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