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Thirty Year Treasury Bond Futures Hit Nine Month Highs

by Archer Financial Services | Jan 02, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures in the U.S., Asia and in Europe fell as weak data in Asia and Europe heightened fears of a global economic slowdown, while the U.S. partial government shutdown continues.

China’s factory activity contracted for the first time in 19 months in December.

The China Caixin manufacturing purchasing managers index fell to 49.7 in December. That is the first time the sector has been in contraction territory, which is under 50, since May 2017.

Also, euro zone manufacturing activity barely avoided contraction territory, declining for the fifth month and taking the reading to its lowest level since February 2016.

The 9:30 central time U.S. December PMI manufacturing index is expected to be 53.9.

It may take a while, but downward pressure on interest rates globally, of course not from the Fed in the short term, will ultimately rescue this market.

It is better to trade other markets where the fundamentals are more lined up in the same direction, as is the case for gold and the thirty year Treasury bond futures.

 

CURRENCY FUTURES

After making a ten week low in the overnight trade, the U.S. dollar was able to recover and trade higher.

Strength in the U.S. dollar today is primarily due to weaker economic data overseas.

The British pound is lower in spite of news that the U.K. manufacturing PMI rose to a six month high, which is stronger than all forecasts. 

 

INTEREST RATE MARKET FUTURES

Futures are higher in response to lower stock index futures, with the thirty year Treasury bond futures hitting a nine month high.

In spite of the Federal Open Market Committee, at its December 19 policy meeting saying it plans to hike its fed funds rate two times in 2019, the financial futures markets believe the Fed may not be able to hike rates even one time in 2019.

Can the Federal Open Market Committee continue to pencil in two rate hikes this year?

Financial futures markets are predicting there is only a 15% probability of a 25 basis point rate hike from the FOMC in 2019 from the current rate of 2.25%-2.50% and a 12% chance of a reduction in the fed funds rate by 25 basis points to 2.00%-2.25%.

On Friday, January 4, Federal Reserve Chairman Jerome Powell will participate in a panel on a to-be-announced topic in monetary policy and central banking at the American Economic Association meeting in Atlanta, Georgia.

Longer term, I expect the interest rate futures market will likely trend higher, led by the thirty year Treasury bond futures.

Continue to trade the interest rate futures from the long side.

Gold futures advanced to a seven month high. The yellow metal is now closing in on psychological resistance at the $1,300.00 level. Gold is likely to continue to advance in the longer term.

Also, silver prices hit a six month high overnight. 

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2449.00      Resistance    2525.00

 

March 19 U.S. Dollar Index

Support    95.310        Resistance    96.370

 

March 19 Euro Currency

Support    1.14250      Resistance    1.15740

 

March 19 Japanese Yen

Support    .91580        Resistance    .92590

 

March 19 Canadian Dollar

Support    .73310        Resistance    .73930

 

March 19 Australian Dollar

Support    .6984          Resistance    .7078

 

March 19 Thirty Year Treasury Bonds

Support    145^16       Resistance    146^30

 

February 19 Gold

Support    1278.0        Resistance    1295.0

 

March 19 Copper

Support    2.6000        Resistance    2.6850

 

February 19 Crude Oil

Support    44.27          Resistance    46.13


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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