Gold hit a new high this morning of $1254.50 on European currency and equity concerns. Fed Chair Bernanke hit the wire as well, trying to assure the markets that the US will avoid slipping back into recession. Doesn’t seem as many are listening given another round of early stock gains followed by selling into strength. Stock bulls are doing their best to defend the 1040 level in S&P’s (currently 1046) but need to move higher or will most likely fall under their own weight with a new target of 980.
Treasuries and mortgage backs continue on the cheap, proving a safe haven for investors to park money. While our market looks to be on track for further gains, the stability we’ve seen (at these levels) has not been able to shift studies to bullish readings. This puts the market is somewhat of a vulnerable position, needing to trade and close below a yield of 3.09% on the 10 year note (currently at 3.16%).
We have auction paper to distribute this week starting with 36 billion 3 year notes today, 21 billion of 10 year notes tomorrow, and 13 billion of the 30 year bond on Thursday. “If and when” risk assets (stocks) find some stability, the correction in treasuries will be sharp and swift. Don’t see it in the cards right now but just the same, at some point it will take you by surprise. With the 10 year note up 3/32’s and MBS up 4/32’s, the tactical bias is neutral to slightly bearish. Careful out there.