All Posts (10732)
Sort by
So while the recovery in the EUR/USD was not supported by any tangible initiatives to increase the safety net for the Eurozone, the vote of confidence and commitment from the central bank head was enough to reassure investors that the ECB will not sit by idly and watch the euro disintegrate. The problems for Europe are far from over but the sharp decline in Spanish and Italian bond yields will bring immediate relief to fiscal finances.
Kathy Lien
Managing Director
BK Asset Management
Presented by Nick Santiago July 26, 2012 10:24AM
There is no denying that the Mario Draghi comments have caused a massive rally in the stock markets this morning. The important and highly followed SPDR Dow Jones Industrial Average (NYSEARCA:DIA) is trading higher by nearly 2.00 percent on the trading session. Many European stock indexes such as the iShares MSCI Italy Index (ETF) (NYSEARCA:EWI), and the iShares MSCI Spain Index (ETF) (NYSEARCA:EWP) are trading higher by over 6.00 percent this morning.
Normally, a rally of this size would cause the bond market to sell off, however, that is not exactly the case this morning. Today, the important iShares Barclays 20+ Year Treasury Bond (ETF) (NYSEARCA:TLT) is trading lower by just 0.58 cents to $131.56 a share. Usually, money will come out of bonds and travel right into the riskier stock market. When bond prices go higher it is generally a sign that the institutional money is seeking safety and security. This is really not much of a sell off in bonds today. Short term day traders can watch for intra-day support on the TLT around the $131.00, and $130.00 levels.
Should the TLT decline further today it would be telling us that some institutional money is fleeing the bond market and possibly going into stocks, however, today's bond action is not saying that so far.
Normally, a rally of this size would cause the bond market to sell off, however, that is not exactly the case this morning. Today, the important iShares Barclays 20+ Year Treasury Bond (ETF) (NYSEARCA:TLT) is trading lower by just 0.58 cents to $131.56 a share. Usually, money will come out of bonds and travel right into the riskier stock market. When bond prices go higher it is generally a sign that the institutional money is seeking safety and security. This is really not much of a sell off in bonds today. Short term day traders can watch for intra-day support on the TLT around the $131.00, and $130.00 levels.
Should the TLT decline further today it would be telling us that some institutional money is fleeing the bond market and possibly going into stocks, however, today's bond action is not saying that so far.
The rally may not be very long lived though as it seems that the move was mainly based on technical levels and some offhand remarks by the European Central Bank’s Ewald Nowotny. Economic releases definitely didn’t help the rally as figures were relatively disappointing across the board, but the rally continued anyway.
Not only is Draghi against this idea, but Germany would most likely disapprove as well.
http://www.fx360.com/?et_cid=21594273&et_rid=wallstreet1928@gmail.com
