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DJ Debt Futures Review: Ticks Up Through Last Week's Highs
By Allen Sykora
BEND, Ore. (Dow Jones)--Soggy stocks, a move above $54 per barrel in
crude oil, a weak German economic report and follow-through buying from
Friday's soft U.S. jobs data all combined to send interest-rate futures
higher in Chicago, analysts there said.
Some technical strength also occurred when futures across the yield
curve ticked up through last week's highs, they added.
Dec 10-year notes settled up 8.0 ticks at 112-26.5, Dec Treasury bonds
gained 10 ticks to 112-15, and Mar Eurodollars added 3.0 basis points to
97.52.
"There was strength in (German) bunds overnight," said Frank Lesh,
futures analyst in Chicago with Rand Financial Services. "We had new contract
highs for the German bund after some negative economic news they had. So we
came in and were up already (at the open)."
The Zew think tank reported that financial analysts were less optimistic
about the country's growth prospects for this month, with the economic
indications index falling to 31.3 in October from 38.4 in September. This was
below the consensus analyst expectation of 36.4.
"A lot of this (debt-market strength) has to do with oil," said Beth
Malloy, bond-market analyst in Chicago with Briefing.com.
This has moved back to the forefront in the financial markets now that
Friday's disappointing report on non-farm payrolls is out of the way, she
continued. When energy costs rise, traders figure this will slow economic
momentum by taking money out of consumers' pockets for other purchases.
Nov crude actually settled sharply lower, falling $1.13 to $52.51.
Nevertheless, said Malloy, the fact that it had risen as high as $54.45 was
still worrisome from an economic standpoint.
"We are not trading directly on top of one another," she said. "But
there is still a fairly decent correlation."
Likewise, analysts said, the frequent inverse correlation between stocks
and bonds was occurring. Stock-index futures were weaker all day, although
they pared their losses late in the session and were only marginally lower as
the interest-rate pits closed.
Some buying in bonds and notes likely can also be attributed to follow-
through as a result of the disappointingly low 96,000 rise reported in
September non-farm payrolls on Friday, added Malloy. In particular, traders
took note of the fact that jobs growth in the private sector was sluggish,
she added.
Some mortgage-related buying occurred, said Lesh.
"Technically, we didn't do too much," said Lesh. "But we pushed through
last week's highs in the 10-year and we pushed through last week's highs on
the bond here today. So there could have been a little bit of stops. But it
didn't feel like there was a lot."
Dec Treasury bonds peaked at 112-23, their highest level of the month so
far after taking out Friday's high of 112-11. Dec 10-year notes got up to 112-
31.5, also taking out Friday's high of 112-23.5 and hitting their strongest
level of the month.
Mar Eurodollars followed suit, peaking at 97.55 after eclipsing Friday's
high of 97.515. They hit their strongest level since Sept. 23.
Lesh put resistance in the Dec 10-year notes around 112-30, then 113-09.
He pegged support at 112-11, then 112-even.
Resistance in Dec Treasury bonds was listed at 112-25, then 113-12.
Support was put at 111-23 and 111-04.
In Mar Eurodollars, resistance is seen at 97.59 and 97.61. Support is
anticipated at 97.48 and 97.45.
No major U.S. economic reports were released Tuesday and none are on the
calendar for Wednesday, either.
-By Allen Sykora; Dow Jones Newswires; 541-318-8765;
[email protected]
(END) Dow Jones Newswires