Treasury update.

With the ratings of sovereign debt now coming into question highlighted by the suspension of debt payments by Dubai World another round of panic is setting in. Treasury futures have traded over $24 bln. in notional value already this morning and prices are up nearly one full point. It will be very critical for G-7 nations, the IMF and any other credible forces to send a calming message to the markets quickly. Clearly the US holiday yesterday has exacerbated the situation, or perhaps the resumption of business activity in the US will help make things worse.

There did not seem to be any signs of this type of panic buying in Wednesday’s trading session. Prices were moving higher in treasuries but more in line with year end related buying, and not a flight to quality. Indeed some of the large bond funds were still selling call premium vs. the Mar. future. Those futures now trading 120’01.5 and these guys are short close to 30K of the 120 call and 30K of the 121 strike.

 Backing down to the more mundane, current open interest on the treasury contracts shows Mar. now the more liquid contract, and will be the lead month officially on Monday, see below.

TY     

 

DEC    449,079        - 329,957

 

MAR    976,704       + 396,603

 

FV      

 

DEC     288,391       - 160,484

MAR    633,077       + 219,067

 

 

3YR

 

DEC          2,544        - 774

MAR         1,002        + 639       

 

 

TU

 

DEC    259,727       - 323,723

MAR    779,648      + 285,732

JUN         6,958       + 6

 

DEC (10)  1,363       UNCH


US

 

DEC    221,196       - 118,299

 

MAR   640,570       + 173,172

 

JUN             75       UNCH

 

SEP             1        +  1