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Thirty Year Treasury Bond Futures Make New Lows

by Archer Financial Services | Feb 05, 2018

By Alan Bush | Senior Financial Economist at ADMIS     

 

STOCK INDEX FUTURES

Stock index futures continued lower due to the ongoing political turmoil in Washington.

In addition, there is the government shutdown issue that Congress will contend with this week with Republican leaders seeking a six week funding bill that would keep the government open through March 23.

The 8:45 central time January PMI Services Index is expected to be 53.3 and the 9:00 January 9:00 Institute for Supply Management Non-Manufacturing Index is anticipated to be 56.2.

Analysts are now predicting fourth quarter earnings growth will be 13.6% for the S&P 500, which is up from the estimate of 12% on January 1.

So far, with approximately half of the companies in the S&P 500 having reported results, 78% of them beat analysts’ expectations.

Recent pressure on futures may have to do more with the political tensions in Washington rather than with increasing interest rates. Keep in mind that longer term interest rates were higher in 2014 than they are now and stock index futures were at much lower levels.

In spite of the selling recently, the S&P 500, Dow and NASDAQ are still all higher for the year.

This is not the beginning of any new bear market.

 

CURRENCY FUTURES

The U.S. dollar is a little higher, but overall, the greenback has recently shown a tendency to underperform on bullish news, which is a sign of weakness. The main trend for the U.S. dollar is lower.

Although the euro currency is lower now, the currency of the euro zone is likely to be supported by speculation that the European Central Bank will remove some of its accommodation later this year. In addition, some analysts are predicting an interest rate hike from the ECB in the first quarter of 2019.

The euro zone economy had an even stronger start to 2018 than analysts first estimated.

The composite Purchasing Managers Index for the euro zone advanced to 58.8 in January from 58.1 in December. The estimate was 58.6.

The main trend for the currency of the euro zone is higher.

 

INTEREST RATE MARKET FUTURES

Thirty year Treasury bond futures are slightly higher.

Jerome Powell will be sworn in as the new Federal Reserve Chair today, taking over from Janet Yellen.

The probability of a fed funds rate increase at the FOMC’s March 21 policy meeting is 77%, which compares to 83% on Friday. 

In the longer term outlook, futures are likely to work lower, as it is likely that commodity and wage inflation will accelerate this year and be above the consensus estimates.

This will adversely impact the 30 year Treasury bond futures the most, since the long end of the curve is the most susceptible to the inflation influence.

 

SUPPORT AND RESISTANCE

March 18   S&P 500

Support    2729.00       Resistance    2760.00

 

March 18   U.S. Dollar Index

Support    88.750         Resistance    89.330

 

March 18   Euro Currency

Support    1.24350       Resistance    1.25210

 

March 18   Japanese Yen

Support    .90710         Resistance    .91550

 

March 18   Canadian Dollar

Support    .80110         Resistance    .80880

 

March 18  Australian Dollar

Support    .7882           Resistance    .7966

 

March 18   Thirty Year Treasury Bonds

Support    144^0          Resistance    145^12

 

April 18   Gold

Support    1328.0         Resistance    1346.0

 

March 18   Copper

Support    3.1700         Resistance    3.2350

 

March 18   Crude Oil

Support    64.52           Resistance    65.78

 

For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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