Treasury Traders Unsure How They Feel About Risk

Treasury markets are trading flat-to-higher overnight as investors cannot seem to decide how they feel about risk. The initial reaction was to the upside following the open last night as traders added to last week’s gains. A weaker stock market was encouraging some flight-to-safety buying, but the majority was most likely short-covering ahead of today’s Federal Reserve purchase of 10-year notes.

After last week’s gains traders are hoping for a follow-through rally to the upside as the Fed is scheduled to buy Treasuries on both May 20 and May 21. Gains may be accelerated if U.S. economic reports continue to suggest more weakness in the economy and a slower recovery.

Investors are having a hard time deciding how aggressive to get at current price levels in the June Treasury Bonds and June Treasury Notes. Most are contemplating whether these two Treasury markets are rallying because the next auctions are not expected for two weeks or because of expected weakness in the economy. At times last week, it appeared money was shifting out of equities and into financials, but early this morning the opposite seems to be taking place.

DISCLAIMER: Futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Subscribe by RSS Subscribe by Email