Bond Prices Consolidate Ahead of FOMC Meeting
Today’s Spotlight Market
Fed officials will have a slew of new economic data to ponder ahead of the two-day Federal Open Market Committee (FOMC) meeting this week. Data such as Retail Sales, Industrial Production and Capacity Utilization hit the wires on Tuesday. Wednesday morning, the Fed will get another update on inflation with the release of CPI data for August. Thursday morning will see Housing Starts as well as Weekly Jobless Claims.
Fundamentals
Bond traders are keeping their powder dry to start the week, as the Treasury futures prices remain range bound ahead of the September FOMC meeting that will conclude Thursday morning. The million dollar question is whether the Fed will finally announce the first interest rate hike since June 2006 or once again postpone the inevitable and push back the timing of an interest rate hike to the end of October at the earliest.
While there are certainly signs that the U.S. economy is on much firmer footing since the Fed took drastic actions back in 2008 to move the Fed Funds rate to near zero during the worst days of the global financial crisis, concerns about the Chinese economy as well as increased volatility in global equity markets may cause FOMC voting members to shy away from even a token rate increase until conditions show some signs of stabilizing.
However, a ?punt? on a rate hike may actually trigger more volatility as market participants react to the continued uncertainty on when the Fed will actually raise rates. At some point, the Fed will need to finally ?rip the band-aid off the wound? and let the markets begin the process of adjustment to a rate hike instead of continued ?hyperventilation? being experienced in the market based on the uncertainty of timing of a Fed interest rate move.
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for Treasury Bond futures, we notice prices have consolidated below recent highs since the start of September, as it appears traders are taking a wait and see attitude towards any actions by the Fed prior to establishing any meaningful long-term positions in the long-end of the yield curve. Trading volume has fallen sharply since the start of the month, which highlights market participants? hesitation towards the Treasury market ahead of the FOMC meeting. Prices are holding just above the 200-day moving average (MA), but are still just lightly below the 20-day MA, giving a modest bias towards Bond bears. The 14-day RSI is confirming the neutral to slightly bearish bias with a reading of 39.20. Near-term support is seen at 150-31, with resistance found at 156-02.
———————————————————————————————–
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the “Disclosure Statement for Futures and Options” prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.