Bonds Blast Off
In their biggest one-day move in 13 years, T-bonds exploded higher after the
Treasury Department said it would stop issuing the 30-year securities, a
move it had intimated but never explicitly said would occur. Price action
has been a tip-off: T-bonds
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Momentum-5
List for weeks and have been highlighted in recent Nightly Futures Reports.
Although they ticked lower on the opening, T-bonds
traded above their opening five-minute range 45 minutes into the session.
Players long from this point were launched up two whole points in less than
30 minutes after the announcement. With the Treasury stating it will no
longer issue the long-dated maturity, the supply of instruments with 30-year
durations will shrink significantly. Lower supply results in higher prices.
Bond yields have an inverse relationship with their price with higher prices
resulting in lower yields. The Department of Treasury also put forth a desired
economic effect (stimulus) of driving down the long end of the yield curve,
a factor that could effect mortgages, the housing market, construction and
related industries. Longer-term interest rates have not come down as fast as
shorter-dated debt instruments.Â
Stock index futures started higher in something of a relief
rally following release of the first estimate of Q3 gross domestic product.
GDP fell by .4%, where consensus estimates were forecasting a 1% drop. The
indices are falling back now to test opening levels, with
Dow futures
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territory. This type of comparative action in the indexes suggests blue
chips will either lead to the downside or underperform in any up
moves.Â
Also highlighted in Wednesday’s
Setups,
unleaded gasoline
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lows after closing at a double bottom Tuesday.Â
In a move that rescinds
their downside bias, February 2002Â pork bellies
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have spurted their daily limit of 3.000 and trading has halted at 70.100.