T-Bond trading comment (August 20, 2007)

Ok we are still in the summer lull. Low volumes, low bid and ask quantities even at the peak of the day and illiquid trading patterns. After friday's indecisive trading session, we were due to see a little bit of movement today... Trend followers must have been happy today with nice, clear trends. That is, of course if you were not spooked off by the low liquidity or on the beach drinking a margarita. After testing lows in the wee hours of the day, we started to trade higher as equities were unstable. After that, the market really picked up as equities were giving ground on more credit risk news... Noise in the market, that certain mortgage shops cannot trade derivatives anymore on concern that they will not be there in a few months... Also, there is some noise about the canadian commercial paper(ABCP) crisis coming to the US and Europe. If that is the case we could see more trouble in the near future... Just a reminder: There is ten times more ABCP in the US than in Canada. Not pretty....

We are again closing very near to the 110-00 level, with friday's option expiration looming and no economic news on the tape we might stay put at 110-00 until Friday as option seller will want to keep it right there. In conjunction with that, we saw this morning some heavy bids/offers (well heavy given actual low volumes) stay there and try to keep the price around the figure.