RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Treasuries are ripping higher today as traders and investors look for safe harbor in what is becoming an increasingly turbulent political sea. The revelations that President Trump shared sensitive intelligence with Russia’s foreign minister, and that he may have asked FBI Director Comey to back off an investigation of ousted National Security Advisor Flynn, has eroded confidence in the administration’s ability to govern. Calls for impeachment are getting louder and more frequent. This puts into jeopardy the large fiscal stimulus plan that was expected in the early months of the Trump administration.

Selling Treasury bonds had been a logical position for traders betting that expansive fiscal policy, including lower taxes and large infrastructure spending, would lead to stronger economic growth and higher inflation, factors that reduce investors’ appetite for bonds. However, logic is thrown out the window when anomalies like possible impeachment enter the picture. During times of uncertainty, traders flock to quality, with US Treasuries being first on the list. Just today the odds that the Fed would raise short-term interest rates in its June 13-14 meeting have dumped from 74% to the 50% range, as uncertainty throws the Fed a curve ball. 

Currently, the June 30yr Bond is trading 153’24, which is up 2’05 on the day. That is the biggest up-move of the year, and looks to be at a one month closing high. Resistance comes in the form of a gap created from the 4/21 close and 4/24 reopen. That number is 153’30 as gap resistance. Barring an implosion of Trump’s presidency, the Fed should move in June to raise rates, with a follow up later in the year. This rally in bonds could be short lived if political tensions subside. But don’t count on it, word on the street is that FBI Director Comey will be testifying in front of Congress next week.


Jun ’17 30yr Treasury Daily Chart

Jun '17 30yr Treasury Daily Chart

Tarik Husseini