The treasuries, specifically the ten-year note, had a decent bid to them this morning and were trading at 129.10 up 5.5 ticks while having a high of 129.14 and a low of 129.04. The 10-year note has been acting well this week making three consecutive higher highs, so the short-term trend lies in the bull camp. Traders have been waiting for the phase one deal that was signed earlier today. We have not seen much reaction since most markets have already priced this deal in. The problem I see with the deal is that most don’t even know what the deal contained. My best guess is its nothing more than a truce as tariffs remain on China. I wouldn’t be surprised to see a “sell the fact” type of trade where many traders take profits off the table in stocks and start allocating some money in to Treasuries as a safe haven. I say this because there are still many uncertainties going forward with China and no one expects any new developments on working towards the “phase two deal” for a long time to come. Traders should expect a pickup in volatility as the phase one deal is now complete. I would encourage traders to keep a eye on the S&P 500 for a key reversal today, where a new contract high is made and then closes lower on the day. If that should happen, expect to see bids across the whole Treasury complex.  The S&P is only up 1 point so the “sell the fact” trade might just come to fruition.

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Greg Perlin

Senior Market Strategist

Greg is a former Chicago Board of Trade member. He was an independent floor trader, pit broker and floor broker with Cantor Fitzgerald. Some of his clients included traders from Morgan Stanley and Lehman Brothers. He also acted in the capacity of desk manager for the morning trade desk. Greg was part of the elite Lind Plus Division for 10 years before joining RJO Futures in 2011.

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