T-Bond trading comment (November 7, 2007)

Another day passes and we are still under the 114 level even after an unsuccesful try to the upside early this morning on more credit news... We are about flat over the day but this is only due to some steepning trades being put in place. If it was not of that, the T-bond would be much higher as are the 10 and 5 years notes. The T-Note closed on the top side of its daily range while the T-bond just bounced off its lows and slowly drifted higher but with a good lag.

For the last few days, we have been consistently bouncing off the 113-13/16 area. This would tend to indicate that this is becoming a new support level that would favor higher prices... Options are also showing more potential to the upside. This view can be easily explained by the fact that given the current context, people tend to prefer longs against shorts and will therefore be unwilling to sell in the wind even if long targets are reached. Talking about targets, the bund has bumped again, against the low 114s... It will be interesting to follow its pattern.

Stocks and news were definitely bearish with stocks getting hammered (Dow Jones down -2.64%). The only piece of news reaching ours ears were either about losses, writedowns or weak capital ratios... Not good. Also, we had several Fed speakers that were not exactly bullish...

Tomorrow, we have 30 years auction which could put a bit of pressure on the long bonds in the morning. Also on the economic front we have Claims and Bernanke testifying about the US economic outlook...