Economic Optimism, Supply Fears Punish Treasuries As Greek Crisis Winds Down and Many Chinese Issues Cut Deep, Sloppy Cups

The yield curve steepened, with prices of longer-dated bonds and notes falling farthest ahead of auctions of three-year and reopened 10-year notes and reopened 30-year bonds starting Tuesday. Michael Pond, a strategist at Barclays Capital, said it was natural for 30-year bonds to cheapen most dramatically of any security on the yield curve because of long-term concerns about inflation.

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“The market will have to cheapen more and more to absorb the significant amount of supply that the Treasury is issuing,” Pond said. “Little by little, we do expect rates to head higher this year.”

Analysts said a lack of significant economic data and relative political quiet helped put the market’s focus on the coming supply and depressed volume.

“When you have a light economic news week, supply takes center stage,” said Raymond Remy, U.S. head of fixed income at Daiwa Securities.

Markets enjoyed relative political calm Monday, with worries over a Greek debt crisis subsiding. [Read the full article]

The European session wasn’t nearly as robust, with the major markets posting either small gains (FTSE 100 rose 0.1%) or small losses. Paris’ CAC-40, which showed a follow-through session on Friday, slipped 0.2% on Monday.

China still sources many of the market’s highest-rated ADRs. But many former leaders have fallen hard. Of those that are basing, one finds a spate of cups that run far deeper than the 30% maximum you’d want to see.

China Automotive Systems (CAAS) corrected 48% before building its right side. Real-estate services provider E-House Holdings (EJ), which shot up 10% Monday, corrected 36%. Pollution-control issue SmartHeat (HEAT) corrected 45%.

Small-cap issue Telestone Technologies (TSTC) has built a cup and handle. This maker of equipment for telecom carriers posted stunning gains late last year.

But this cup runs 49% deep. The handle runs 27% deep and carries too much volume. One look at its chart shows a sloppy pattern. [Read the full article]

The market’s resiliency could help bring needed capital into the country and speed reconstruction.

Plenty needs to be done. Many companies halted production and services. The epicenter was near paper and pulp mills, fishing ports and vineyards. Stores suffered from looting, though about $2 million in goods have reportedly been returned.

“Although the economy will suffer the negative effects of the earthquake at the end of February,” wrote Alfredo Coutino, an economist at Moody’s, “we expect the economy to recover faster in the second half of the year, additionally stimulated by the reconstruction process.”

Chile’s economy is projected to grow 3% to 4% this year after shrinking 1.7% in 2009, Coutino says.

The MSCI Chile index rose 2.46% the week after the Feb. 27 earthquake. The index was up 4.57% this year as of March 5. It has outperformed the regional MSCI Latin America index, which was down 0.84%. The MSCI Emerging Markets index was down 1.47%. [Read the full article]

In front of the smart phone manufacturers March 31 earnings release, an intraday bid of nearly 6% to 73.50 boosted the share price in RIMM to its highest levels since late September. Technically speaking, Mondays strong bid appears to be a confirmed breakout from a handle consolidation as part of a low-level base.

The base in question has a cup-on-cup or pattern shape to it in the opinion of this market strategist. Additionally and without splitting hairs over the formation, the move has sent shares of RIMM into a rather large unfilled gap from above 83, which marked a rather large earnings-related price gap down to about $70.50.

On that sometimes accurate heat-seeking option front, traders by and large appear to be positioning for upside potential as well, or at least are willing to get out of the way by covering short call wagers. [Read the full article]

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