US TREASURY FUTURES REPORT 03/26/2009

ECONOMIC DATA 03/27/2009: all times EST

· 8:30 AM PERSONAL INCOME & OUTLAYS (-0.2%)

· 9:55 AM UNI OF MICH CONSUMER SENTIMENT (56.7)

ECONOMIC DATA 03/26/09 US 4 TH QUARTER GDP (-6.3% VS. -6.6%) US WEEKLY UNEMPLOYMENT CLAIMS (NEW CLAIMS (652 K VS. 650K). US 7 YEAR NOTE AUCTION ($24 BILLION BID TO COVER 2.52, YIELD 2.384)

US TREASURIES RALLY BACK TO HIGH END OF RANGE ON WELL RECEIVED 7 YEAR NOTE AUCTION.

US Treasury futures seesawed between the recent ranges defined by last week's FOMC post meeting rally. The markets ended the session posting strong gains after a better than expected showing for the US 7 year note auction. The term “less is more” appeared to be the key to success for this auction. Despite its record $24 billion offer, the auction was significantly less than the $34 billion offered in Wednesday's 5 year note auction, which triggered a massive selloff in equities on concerns regarding the US government's ability to fund the unprecedented levels of stimulus perceived needed to jump start the economy. Today's results demonstrated the trickle down influence of these auctions upon related financial markets, such as equities, currencies, and commodities.

Yield on the auction came in at a slightly better than expected 2.384% and the bid to cover ratio posted at 2.52. This bid to cover was significantly above yesterdays 2.01 for the 5 year auction. The auction results allowed for a significant boost in prices along the entire yield curve and reignited a rally in equity and commodity prices that appeared to be in danger of stalling out. The report allowed the major equity markets to push and hold above key near term resistance levels (820.00 in S&P, 7800 in Dow). Treasuries will be likely seeking direction from two influences in the near term- the next Fed purchase of Treasury Debt(amount and aggressiveness will be key factors) and the results of the upcoming G20 meeting where confrontation with China could produce insight into the support that the largest holders of foreign debt have for the US economic bailout strategy.

Technically, June 30 year bonds continue within the range set last Wednesday between 126.280 and 129.170. Down side support if a breakout occurs remains at 125.120, while upside resitance pulls in slightly at 130.20.