My takeaways from the Bernanke testimony on Capitol Hill yesterday were: economic activity has decelerated during the first half of this year, risks to global economic growth have increased and still remain big concerns. Inevitably Uncle Ben reiterated the Fed's pledge to "take further action as appropriate to promote a stronger economic recovery.”
The overall market was hoping for a stronger rhetoric in my opinion and the initial reaction in the Treasury complex is selling. As seen in the chart above, prices appear to be rolling over from around the same levels we started retracing from in late May. A close below the 9 day MA--the green line--would be the first confirmation though a stronger signal would be a settlement back under the 20 day MA--the orange line.
Aggressive traders could probe bearish plays with a first target of 145’20 in September futures. I would not commit with any size until a settlement under the 9 and 20 day MAs. Another possible play would be to play the curve with a NOB spread; short 30-yr bonds and long 10-yr notes.
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