PFGBEST Interest Rate Comment

CHICAGO - Jan 14/10 - SNS -- Following is the interest rate futures comment from PFGBEST Research.

What the USD is saying about Treasuries(2)

Eaven Horter: ehorter@pfgbest.com  (312) 563 8165

Take a peek at the chart below; it compares the US Dollar Index futures with the 10 Year T-Note futures over the past 6 months.   Do you see what I see?   A fairly strong inverse relationship between the two but with a bit of a lag in the 10 Year's action?

The above relationship shouldn't come as a surprise given interest rates are the primary driver of the  USD but I wanted to make sure I pointed out the action over the past week ' dollar down and 10 Year futures down.   This is the reverse of what the 10 Year T-Note futures and US Dollar Index futures have been experiencing; I believe the large amount of auctions that are coming to market this week in the middle of the curve may be delaying the 10 Year's rebound in addition to weak volume.   With this in mind and given the large move down in December that  10 Year futures have experienced, the US Dollar Index retracement since December 22^nd leads me to believe we will see strength in the 10 Year T-Notes starting next week.   So, consider near term support to be close to the 114-24 level and resistance near 117-16; we will not see similar 2009 highs in the 10 Year T-Notes in 2010 unless there is a severe disruption in the markets.

PFGBEST Research Team

Phone: 800-361-6855 or 319-553-2181

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