T-Bond trading comment (August 07, 2007)

Another "q" day! We had a super range of 5/32 during almost 3 and half hours.... So interesting... It is not my style but was reduced to offer at the top of the range, bid the bottom and cover in the middle. Don't like doing that. The interesting part of the day was when the Fed came out on the tapes. As expected, the Fed still seems to worries more about the inflation than about growth accordingly the market went down but was bid right after. The reason for this move was a bit mysterious to my knowledge, but the move was instigated by equities that were puking like there was no tomorrow. This unexplained sharp move reversed quite rapidly and we resumed our descent. There was a sell signal when we broke the 110-02 suuport and went on to lose half a buck... Afterwards, the market calmed down and guess what? We went back up to hug to our 110-00 line... So we still haven't broken one way or the other from the 110-00 area, but swap spreads continued there downward move today, so we might experience lower prices in the near future...

Point of interest: After the Fed released its comments, almost everybody scowled against it saying that the Fed was wrong and they should be looking a lot more closely to what is happening in the housing market.... In fact, even before the release, there was a piece of news from Merrill Lynch stating that the Fed should cut rates by 75-100 bps.... Interesting to see what will come out of this. In any case, the clash means potential volatility !