T-Bond trading comment (October 2, 2007)

Okay we have overpassed the 112 line but for now, this passage does not look too convincing. In fact, we closed the day barely over at 112-01 after trying higher highs and failing on heavy offering. We arrived this morning with the T-bond being hit as European equities were on fire after yesterday's Dow Jones performance. While waiting for the pending home sales, we had some interesting range trading comprised of yesterday's support at 111-16 and 111-25.

At 10h00, pending home sales were out and worst than expected even after last month monster loss. As expected, this sparked a rally toward the 112 line. After a bit of hesitation, we went through and went up to the 112-10 level. This was the perfect level to sell our 111 call since the market had moved by one dollar since we put on the trade... yesterday (Historically, it takes a bit more time to reach the 1 dollar level). In the perfect world, we would now want to see the 112 line holds its ground and send the T-Bond lower... We will see in the coming days.

We are getting closer to Friday and the NFP... The market is pricing a +98k which is pretty strong, if we come under that we could very well open the door for higher prices. By the way, the CGBs and the Bunds have both cleared their configuration for higher prices. Their targets are about 2 bucks higher each. Stay tuned for the US...