Treasury Bonds and Notes Surge on Good Auction Results
December Treasury Bonds and Treasury Notes surged in the afternoon following better than expected results from today’s $42 billion 5-Year Treasury Note auction. The decline in U.S. 3rd Quarter GDP provided support earlier in the trading session along with weaker equity prices. The strong interest in fixed income instruments could be a sign that investors are looking for protection from risky assets in safe-haven assets like the Treasuries. All of this activity points toward perceptions that the U.S. economy is still in a weak state.
Equity futures sold off early in the trading session and remained rangebound throughout the day in thin, lifeless trading. The combination of the weak GDP number and lower consumer confidence helped to encourage selling early in the trading session. Technically, the S&P 500 and the NASDAQ are the weakest markets. Both produced closing price reversal tops last week and both failed to make new highs for the year. Signs that the economy will remain in a weak state are beginning to weigh on traders’ minds leading some to take a little money off of the table.
Sideways-to-lower U.S. equity markets helped prop up the Dollar on Tuesday as traders became more averse to higher risk assets. Trading conditions were thin and lifeless which made it difficult to determine if today’s action was being triggered by holiday liquidation or U.S. economic reports. Nonetheless, the trading action was not normal which set-up the possibility of bull and bear traps throughout the day.
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