US TNote Future – Dec 2009

Nicole Elliott from Mizuho Corporate Bank at 11/24/09

Comment: Open interest highest in over a year as investor’s understand who (and why) would fund the US government’s ballooning budget deficit. It is just a question of time before benchmark ten-year TNote yields break decisively below the pivotal 3.25% level. A monthly close below here (hopefully this coming Monday) would cause a one-off shift in the structure and level of interest rates - permanently lower. Likewise a weekly close above 120.00 on the Dec09 futures contract.

Strategy: Buy at 119.26; stop below 118.24. Add to longs on a daily close above 119.29 for 120.20 short term, then 121.00/121.16 and eventually for even higher prices and lower yields through to year-end.