DeCarley Trading Bond Bulletin

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

June 4, 2010 at 2:34 pm • Posted in General

Yields soar as flight to quality squashed (0)

May 27th, 2010

Check out the Futures Magazine review of “A Trader’s First Book on Commodities” by Carley Garner

http://www.futuresmag.com/Issues/2010/June-2010/Pages/A-Traders-First-Book-on-Commodities-An-Introduction-to-the-Worlds-Fastest-Growing–Market.aspx

Yields soar as flight to quality squashed

An overdue recovery in the Euro and U.S. equity markets lured money back into risky assets and away from the safety of Treasuries. One day does not make a trend, but this seems to be the beginning of some attempt at “normalcy”.

We have been getting solid economic news recently despite a few minor disappointments in this morning’s data. The latest revision to the first quarter GDP was reported at 3%; a bit less than the expected 3.2%. Similarly, weekly jobless claims remain stubbornly high. According to the Labor Department, last week’s claims for unemployment benefit was 460,000.

The Treasury markets have spent their seasonally bearish months rallying, and this makes speculation going forward very difficult. In a typical year, bonds and notes should have traded weaker for much of April and May and would be “looking for a bottom” in early June. However, with bond and note prices so elevated it is difficult to imagine that the seasonal lows will be put in sometime in the next week.

Completely ignoring seasonals, it seems as though the financial markets might have turned the corner for now. We feel like the June Euro futures has the potential to see a very large short covering rally (maybe as far as the high 120’s). Similarly, the S&P shouldn’t run into strong resistance until we see the high 1120’s or mid 1130’s. Assuming that we are correct, that should put continued pressure on Treasuries in the near-term. We see the first area of support in the September 30 year bond futures just under 121 but if we get some follow through, as low as 117 is possible by late next week.

If you are a bear that has been struggling to scratch on a short trade, it might be a good idea to unload some of your risk. Counter-trend Friday and a three day weekend poses a risk to the market’s bearish tone.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

May 27, 2010 at 2:57 pm • Posted in General

Supply on tap, but can Treasuries get over Europe? (0)

May 21st, 2010

See Carley at the Trader’s Expo in LA, join us on June 11th to talk about “Trading Commodities Like a Girl” https://secure.moneyshow.com/msc/caot/registration.asp?ts=t&sid=caot10&newReg=t&scode=018859

Supply on tap, but can Treasuries get over Europe?

Earlier this week we urged all of our clients to get flat Treasuries because things didn’t “feel” right and they still don’t. Treasuries have managed to maintain an upward bias in the face of higher equities (the few bounces that we have gotten), a recovery in the Euro, this signals that there are some behind the scenes forces that are carrying a bit more weight such as emotion.

When markets become emotional, they are nearly impossible to predict. Let’s face it, humans are unpredictable and market prices are the result of the conglomerate of human reaction to news and events. That said, under most circumstances I believe that the Treasury markets tend to maintain their composure much better than equities do. As a result, bonds and notes are often late to react to the equity and currency markets; accordingly, we don’t feel as though being short Treasuries has the risk reward prospects that we would like to see. Perhaps sitting on the sidelines is the best position for now.

The economic calendar for next week will be thick and might be what the markets need to get their heads off of Europe. We can’t deny that a credit crisis overseas wouldn’t be devastating for domestic markets but we also can’t assume that European leaders won’t make the reform necessary to mitigate the pain. If you have to play Treasuries, you should likely have a bearish bias but you want to keep risks low and don’t overstay your welcome. Friday’s highs should stay intact for now; if so, support in the 30-year comes in near 123′27 and then again near 123′04. Good luck!

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

May 21, 2010 at 12:21 pm • Posted in General

30-year auction sucks bid out of market (0)

May 13th, 2010

See Carley at the Trader’s Expo in LA, join us on June 11th to talk about “Trading Commodities Like a Girl” (http://www.moneyshow.com/caot/WorkshopDetails.asp?wkspid=C0F78BEC175A43A68A939CAB488E0235)

30-year auction sucks bid out of market

Bond and notes moved higher in early trade as equities struggled. After two consecutively strong Treasury auctions, and questionable fundamentals in overseas fixed income markets, the traders were anticipating strong demand for the 30-year.

Lofty expectations seemed to have just set the market up for failure. In post-auction trade, the long end of the curve dipped well into negative territory. The $16 billion issue of bonds went off at a higher than expected rate of 4.49%, a bid to cover of 2.6 and an indirect bidder take of 32.5%. Nonetheless, the selling was temporary and Treasuries migrated back to unchanged.

In economic news, weekly jobless claims were slightly worse than expected. However, the week’s most notable data will be released tomorrow. We will start off the day with retail sales and then a little later in the morning we will have the Michigan Sentiment index and business inventories to digest.

Not much has changed, so we are holding with yesterday’s commentary:

Based on action in other markets, we believe that the June T-Bond futures “should” have traded down to 119. This is a bit discouraging, but we are still looking for about 118′23 in the coming sessions. This would equate to about 118 in the June T-Note futures. Good luck!

That said, we expect low volume tomorrow and a counter-trend move is possible. If you are sitting on open profits, you might want to lighten up or even flatten out…especially if we see early morning weakness.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

April 22 – Our clients were advised to sell the July bond 121 calls for 22 or better, and were filled this morning on the rally.

May 7 – Clients were recommended to buy back the July 121 calls and sell the July 124 calls instead. The swap was done at a debit of 1′20 and left some money on the table but the goal must be capital preservation at this point.

May 10 – Clients were advised to sell the July 115 put for 36 or better

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

May 13, 2010 at 1:38 pm • Posted in General

Sovereign debt downgrades spark flight to quality (0)

April 27th, 2010

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Sovereign debt downgrades spark flight to quality

Tuesday was an event packed session and with the FOMC’s interest rate decision on the docket for tomorrow, we could get much of the same excitement.

The Case-Shiller home price index came in a little below expectations at an increase of .64% but that news was quickly forgotten once the market got word of a Greek debt downgrade by S&P to junk status. Additionally, the S&P knocked Portugal’s rating to an A- (just a notch above junk). Keep in mind that before the “crisis” eligibility for sovereign securities states was an A-.

Naturally, the downgrades made U.S. Treasuries more attractive given the perceived lack of default risk. As a result, bonds and notes rallied and yields plummeted. On the other hand, the last that I had heard…the Greek 2 year note was paying nearly 15%, more than double the yield of jus a week and a half ago!

As if overseas debt concerns and tumbling equities weren’t enough for the market to digest, the Treasury issued a healthy serving of 2-year notes. $44 billion of the 2-years were issued at 1.024% with a 3.03 bid to cover and an indirect bidder take of 31%. A yield of about a percent is a far cry from the 14% that Greece must pay investors. I don’t see how any nation could afford to borrow at such rates for any sustained period of time.

Treasuries were on the move today, but we wonder if the buying spree will last. It will likely depend on the Fed’s stance tomorrow on monetary policy, but we are leaning toward being bears on rallies. We see resistance near 119 and again just over 120 in the June bond, but such prices might not be possible if equity market (and overseas debt) volatility subdues.

Resistance in the 10-year note is 118′01 and 11925 if things really get out of hand.

Don’t forget to register for our upcoming webinar with SFO Magazine!! See our website (below) for details.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

April 22 – Our clients were advised to sell the July bond 121 calls for 22 or better, and were filled this morning on the rally.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

April 27, 2010 at 10:53 am • Posted in General

Yield curve flattens in light action (0)

April 20th, 2010

See us at the LA Trader’s Expo Friday, June 11 2010: http://www.moneyshow.com/caot/WorkshopDetails.asp?wkspid=C0F78BEC175A43A68A939CAB488E0235

Yield curve flattens in light action

Treasuries were mixed on Tuesday with the long end of the curve spending most of the day in green territory and the short end decisively red. Had the Bank of Canada not begin with it’s dovish talk about consecutive rate hikes into year end, we might have seen a more pronounced bullish bias.

The Treasury will announced the next round of note issues on Thursday. Specifically, the 2, 5 and 7 year notes will be offered along with a batch of 5 year TIPS. Most analyst are looking for record size, and this could rekindle supply concerns.

We are a little uncertain as to the disconnect between notes and bonds. Our technical target/resistance area in the note worked like a charm but the T-bond rally lagged. The Bond chart suggests that there could be another surge to the rally but an apparent reversal in the note is suspect. For now, we are going to have to assume that the bond is the leader and that the outlook for moderately higher pricing is possible. That said, we like the short side of this market. Look for a good place to be a seller. There is a strong band of resistance from the mid 117’s to 118.

Don’t forget about our webinar with SFO Magazine on April 29th, you can sign up for free on our website (below).

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

April 20, 2010 at 2:11 pm • Posted in General

Mixed data leaves path of least resistance higher in Treasuries (0)

April 15th, 2010

Upcoming webinar with DeCarley Trading and SFO Magazine, “An Alternative Look at the Trading Plan”, register for free at https://www2.gotomeeting.com/register/872525859

Mixed data leaves path of least resistance higher in Treasuries

Bonds and notes traded mostly higher on Thursday amidst a whirlwind of mixed economic data. However, questions in regards to the jobs recovery focused a considerable amount of attention on this week’s weaker than expected jobless claims figures.

Initial claims for unemployment benefits rose to 484,000 last week to leave continuing claims at 4639k; the numbers were steep given the previous data. The Philly Fed came in at 20.2 to top estimates but industrial production was reported as a much smaller increase than was expected.

The lack of Treasury auctions took some of the edge off of the bearish trade and that might continue into next week. The Fed will be issuing $25 billion in bills, but that shouldn’t have much of an impact on the longer maturities.

Although the correlation (or negative correlation) between stocks and bonds has been inconsistent we feel as though interest rate products are susceptible to being dominated by overflow action from equities. In other words, should the stock market finally fall from grace (we have almost given up on the idea) it is likely that the negative correlation between the asset classes will re-emerge. This could be what the market needs to push the note and bond to our upside target levels. However, as we have seen, stocks and bonds can travel in the same direction.

We are looking for the Treasury rally to continue overall. Our target in the 10-year note will be 117′10ish and in the June 30-year bond futures we are looking for 18ish.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

April 15, 2010 at 12:07 pm • Posted in General

Auctions, auctions, auctions (0)

April 6th, 2010

Join us on April 8th for a free webinar with PFG on “Demystifying Treasury Futures”: http://www.pfgbest.com/webinar/eventSummary.asp?skey=332215675

Auctions, auctions, auctions

Supply concerns and pessimism over this week’s auctions kept a cap on Tuesday’s technical rally. The only news for the market to look forward to was the release of the March FOMC minutes and the issuance of $40 billion in 3-year notes. Trade spent much of the day grinding in a narrow range ahead of the events.

The note auction turned out to be a relative success with solid demand for the securities. The bid to cover was 3.10, better than the previous 2.83 and indirect bidders accounted for 52.25% of the participation.

The Fed’s Beige book didn’t offer many surprises. The panel believes that inflation risk are to the “upside” but it would be “subdued”. They are also anticipating high rates of foreclosures and view job creation is “essential” to a lasting recovery.

Speculation in the Treasury futures market can be complicated. There are an infinite number of factors influencing pricing, they are quoted in fractions and to many it is unclear as to what exactly what asset the contract is deliverable upon. If you want to learn about the basic mechanics of the Treasury markets, come and learn with us (for free) on Thursday (see registration link above).

We are sticking with yesterday’s analysis:

The futures look weak to us, and therefore we are looking for moderately lower prices. However, the lower prices go the more the odds favor a technical bounce. We will be bullish the 30-year bond just under 114 (revised a bit lower from last week) and we begin to like the upside in the 10-year note in the mid 114’s.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

March 25 – Clients were advised to sell the June 110 puts in the 30 year bond for 24/25 ticks.

March 31 – Clients were recommended to buy back the 110 puts for 11 to lock in a profit of about $200 before transaction costs per contract.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

April 6, 2010 at 11:44 am • Posted in General

Treasuries suffer pre-employment report (0)

April 1st, 2010

Join us on April 8th for a free webinar with PFG on “Demystifying Treasury Futures”: http://www.pfgbest.com/webinar/eventSummary.asp?skey=332215675

Treasuries suffer pre-employment report

There were very few traders at work by afternoon trade so we will keep this short and sweet…

Bonds and notes gave back much of yesterday’s rally as traders squared positions ahead of tomorrow’s potential fiasco. The employment data itself makes for an exciting day, but the employment numbers on “Good Friday” complicate the situation tremendously. The open outcry pits will be closed, but Treasuries will be trading electronically until 10:15 am Central.

We aren’t going into tomorrow with any expectations, and those trading short options with us were recommended to get flat yesterday. However, we would likely consider being bullish should bond futures drop to the mid 114’s. In the meantime, resistance can be found at 116′26ish.

Enjoy the holiday weekend!

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

March 25 – Clients were advised to sell the June 110 puts in the 30 year bond for 24/25 ticks.

March 31 – Clients were recommended to buy back the 110 puts for 11 to lock in a profit of about $200 before transaction costs per contract.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

April 1, 2010 at 9:18 am • Posted in General

Treasuries awaken from slumber (0)

March 24th, 2010

Join us on March 25th for a complimentary webinar hosted by DeCarley Trading and SFO Magazine, “Coping with Margin Calls” : https://www2.gotomeeting.com/register/643422002

Treasuries awaken from slumber

Rumors of force liquidations from CTA’s and hedge funds, not so bad economic data, a screaming U.S. dollar and a lousy 5-year note auction all combined to trigger a massive sell-off in Treasuries. The day’s events seemed to have awakened a sleeping giant.

A few days ago we mentioned a lottery ticket play that involved the purchase of an April 119/117 strangle….I hope that some of you did this. At the time of this writing, the 117 put had traded as high as 1′24!!!

We have also been pushing short option traders to exit any open orders as the risk of an explosion in volatility, and thus option premium, seemed imminent. Treasury puts across the board doubled, tripled or more in value in a matter of a single trading day. We will be shopping around for short put plays in the coming sessions.

Durable goods orders were reported at an increase of .5%, a little worse than expectations but a massive upward revision to prior numbers caused bonds to swoon. In fact, the market moved a little ahead of the announcement…it seems like some new the numbers before others.

The Treasury auctioned $42 billion in 5-year notes at a rate of 2.605% with a bid to cover of 2.55 and only 39.7% of participation was from indirect bidders. In other words, the bonds went off at a higher than expected rate and with less demand than has been seen in recent auctions. The auction wasn’t a disaster, but the already shaken market was vulnerable and might continue to be in the coming sessions.

We had a feeling that recent trade was the calm before the storm, but we expected the initial move to be a little higher before reversing. Clearly we were off the mark a bit. Now that the tides have turned, and stocks and bonds are moving in tandem (at least for now) we feel like next downside target in the March long bond will be in the mid-to-low 114’s and just over 115 in the note. That said, don’t chase the market lower…after Wednesday’s trade the market is a bit oversold. Look for a bounce if you want to be a bear.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

1-866-790-TRADE

Local : 702-947-0701