Interest Rates: The Bias is Up as Russia Looms on Ukrainian Border
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Obviously, the treasury markets are garnering flight to quality lift this morning along with the dollar and precious metal markets. Overnight a Reuters’ story suggesting hedge funds have “caught and positioned for” a “seismic” shift in US interest rate market fundamentals. The weekly positioning report showed both bonds and notes to be holding significant speculative short positioning. The February 8th Commitments of Traders report showed Bonds Non-Commercial & Non-Reportable traders reduced their net short position by 1,415 contracts to a net short 67,310 contracts. T-Notes positioning showed Non-Commercial & Non-Reportable traders reduced their net short position by 28,827 contracts to a net short 565,126 contracts. Over the weekend, there were reports that Biden and Putin spoke for an hour and agreed to stay engaged, while the Ukrainian government told airlines to avoid airspace over the Black Sea. The Fed appears to be pushing back against aggressive rate hike projections in the marketplace with San Francisco Fed President Daly warning against being too aggressive on rate hikes, as that could destabilize the US economy. Historically, we have seen the markets run well ahead of the Fed, with the Fed ultimately being forced to concede to reality and catch up with market perceived rate hikes. With no major US scheduled data points today, the Russian situation is likely to be all-encompassing. There are no top-tier economic numbers from the US or Canada scheduled during the North American session. Earnings announcements will include Arista Networks and Advanced Auto Parts after the Wall Street close.
TODAY’S MARKET IDEAS
Not surprisingly, treasury prices have “caught a bid” as the hype of a looming Russian invasion of the Ukraine has achieved a front and center status. Limiting the gains are recent positive US jobs data and surging classic inflationary price measures. However, in the near term, the bull camp looks to have control and could maintain control until someone blinks on the Russian/Ukrainian showdown. Initial resistance in March bonds today is seen at 153-18 and at 127-01 in March Notes. Even higher upside targeting could be seen in the event an oversized net spec and fund short positioning is put under extreme pressure and then we can’t rule out a return to the February highs.
TECHNICAL OUTLOOK
Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.
BONDS (MAR) 02/14/2022: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The close below the 9-day moving average is a negative short-term indicator for trend. The upside daily closing price reversal gives the market a bullish tilt. Market positioning is positive with the close over the 1st swing resistance. The next downside target is 150-060. The next area of resistance is around 154-100 and 154-310, while 1st support hits today at 151-300 and below there at 150-060.
10 YR TREASURY NOTES (MAR) 02/14/2022: The daily stochastics gave a bullish indicator with a crossover up. Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside objective is at 127-175. The next area of resistance is around 127-070 and 127-175, while 1st support hits today at 126-030 and below there at 125-090.