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The Treasury market is posting moderate losses this morning, and has forged a consolidation price range minimally above the prior session's low. Some traders might have been discouraged by suggestions from the US Treasury yesterday afternoon that extraordinary accounting measures would be unwound in the event that the US debt ceiling limit is removed temporarily. They feel that the US deficit is in reality much larger than what is officially being registered, and the Treasury may be using accounting measures in order to avoid violating the US debt limit ceiling.
While Chinese economic data overnight wasn't sharply above market expectations, it was widely felt to be strong enough to bolster expectations of continued growth and in turn put pressure on Treasury prices. However, the Treasury market is apparently focused on a January Non Farm Payroll gain of 150,000 to 165,000, but without a payroll reading above a 170,000 gain this morning, it could be difficult for Treasury prices to slide down into new low ground. At their lows yesterday, March bonds were down roughly 2 points from this week's highs and down roughly 5 full points from their January highs.
In addition to the Non-Farm and Private Payrolls, the market will also see Construction Spending, a private survey of US manufacturing and a private Consumer Sentiment reading all released early today. Most estimates for those reports generally call for positive progression, which in turn could put additional pressure on Treasuries.
Foreign central bank holdings of US Treasuries fell by $89 million in the latest weekly report released yesterday afternoon, which may be a negative for Treasuries as the progression to higher yields does not appear to have inspired scale-up buying interest for US Bonds and Notes. The market may be embracing a pattern of slow global recovery, as gains in the Euro and in world equity markets are pointing to reduced safe-haven interest for Treasuries.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.