T-Bond trading comment (September 28, 2007)

Few, what a day we had ! We opened this morning on the upside, licking the
112 level and boom in the afternoon we went as low as 110-26 before recovering to the 111-11 level which was the opening price! The daily movement does not give a fair idea of the intraday movements... This morning we ticked higher on the back of continued fears about the economy and month end. We had several economic indicators in the morning but they all came around their expected values and did not create any major turbulence. After the news we started to drift slowly lower and we were looking to close the day around 111-22 but that was not to happen.

In the early afternoon, the US Dollar started to weaken against most currencies and started to spiral down prettty fast. Since the US basket and the Bonds are positively correlated, the bond just started to puke on volume. People were dumping treasuries on the fact that if US is getting dumped, that means that foreigners are probably selling their investment and you don't want to be left holding the poop bag alone. The slide was maybe a bit exagerated and we started to win back part of the loss. We closed the day unchanged... Again... We've had a lot of compression days lately, when the market is going to move one way or the other it might be very abrupt.

Next week is the first week of October, so this means that we have NFP! In addition to that we of course have ADP, but also the ISM indexes and pending home sales. Also with the rumour mill spinning like crazy we might get some added volatility. The last one I heard today was that the BOE was going to have an emergency meeting to cut rates....