T-Bond trading comment (August 08, 2007)

Finally, we have an interesting morning with some very nice opportunities for short term and longer term trend followers. We arrived at the office, with a market already quite depressed by news that the Bank of England was ready to increase rates to 6% with no significant economic news or speech in the morning we drifted higher with a clear buy signal at 8h29. After that, we evolved in a narrowing range until we broke the 109-16... Again just before beraking this support, we had a nice sell signal. Next interesting thing, was the 10 year auction that didn't go that well.

This coupled to a soaring stock market cracked the bid side at 108-28 which acted as a resistance afterwards. This resistance held until a rumour (later denied) that Goldman Sachs was going to issue a profit warning and the Dow slided from +180 pts to -12 pts. The rumour put back a bid in the T-bond and we traded higher finding pre-auction level. Not to forget that tomorrow, we have the T-Bond auction which should keep the T-Bond under pressure until then.

Looking at a bigger picture, we can't help noticing that we are assisting to a releveraging of players as swap spreads litterally crashed this morning and the market shrugged off, at least temporarily, housing problems. A consequence of this is that the t-bond as now violently rejected the 110-00 line. Our next trading targets are now more to the downside than the upside. Next point is 108-05, which is the old resitance line for the upleg done between mid-june and mid-july.