Markets have ended in a good mood last week. This week being data intensive we could see some surprises. This week, we have Treasury auctions (3y and 10y), FOMC meeting announcement and inflation data coming up. These factors have direct impact on long bonds.
Fundamental View
30y Treasury rates went up by 31bps last week. As economy is out of recession in terms of market indicators we could see another set of sell off this week. This can be punctuated by treasury funding. FOMC meeting could deliver another big dose of sell off in the market due to less down side risks. Finally rates can get low due to low inflation data. Also equity markets are supporting bond market selloff.
Technical View
MACD indicator shows trend direction is towards lower side. Also markets have not visited the previous high in early july of 122. There is a strong resistance around 120.
I will initiate short call position at 119 strike for USU9. This call will be insured by another long of 125 call. This structure is bear call spread. Net cost of this trade is 234.25 -31.25= 202 before commissions.
Fundamental View
30y Treasury rates went up by 31bps last week. As economy is out of recession in terms of market indicators we could see another set of sell off this week. This can be punctuated by treasury funding. FOMC meeting could deliver another big dose of sell off in the market due to less down side risks. Finally rates can get low due to low inflation data. Also equity markets are supporting bond market selloff.
Technical View
MACD indicator shows trend direction is towards lower side. Also markets have not visited the previous high in early july of 122. There is a strong resistance around 120.
I will initiate short call position at 119 strike for USU9. This call will be insured by another long of 125 call. This structure is bear call spread. Net cost of this trade is 234.25 -31.25= 202 before commissions.
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