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Week ended 29th April , 2011 – Treasury this week

S&P cut sovereign rating outlook of Japan , saying that Japanese debt load will increase with the reconstruction needs . It looks to me something different from Japanese government statement . As in last week Japanese government said that they will not issue bonds or takes money from market for the Emergency relief package they have declared in last week .
Japanese bonds rose this week as industrial production fell due to natural disaster and central bank cut the forecast of economic growth for year ending March 2012 . Thursday Japanese 10-year yield decreases to one month low level .

Let see the  U.S. Treasury yields this week –

4/22/2011- 4/29/2011

2-Year Treasury
5-Year Treasury
10-Year Treasury
30-Year Treasury

Lower GDP rate & decreasing USD , made investors doubtful about U.S. recovery . Value of Treasuries increased these week . Though yield of short-term  Treasuries decreased much , but many were there looking for long-term Treasuries .

 Last day I was talking about growing importance of German bonds over US Treasury , now if we compare them , German bund gave a loss of 1.7% this year and U.S. Treasuries gave 1% in return . In spite of that many are going to vote for German bunds for future , simple because of more security and lesser uncertainties . Up to few days ago investors were taking shelter under precious metal like Gold or under Government backed debt from risky investment options . But after this lower GDP in U.S. and decreasing USD , many are going to evaluate their options , as such they are thinking Gold is better .

Greece’s 10-year yield rose to 16% which is highest in Euro-era . Spread with German 10–Year Bunds rose to 1275 basis points . It’s 2–year  yield rose to 26% . There are  still concern about Greek’s default on payments . Portuguese  10-year yield rose to 9.765 . Spanish 10-year bond advanced and yield drop to 5.29% , though there is some bad economic news like unemployment reports which is highest in Europe .
Indonesia becomes the 2nd Asian country after Philippines, who goes to the market for selling bond worth $2.5 billion at a yield of 5.10%  to cure it’s nearly 1.8% deficit in budget .

Coming week

2-year Treasury Yield is finding resistance at around 0.66 , on the lower side in 0.55 it can face good support . At around 1.90  level 5-year Treasury gets good support and if it falls from this level then it can go as down as 1.5 level .

As I was talking last week about the support of 3.30 level for 10-year Treasury yield , last day it just closed below that level . If it closes more lower levels then it may try to test March low of 3.155 as immediate target . For 30-year Treasury support at 4.45 area has been broken , now it has a good support at around 4.1 level . Last few weeks I was talking about a pattern in 30-year Treasury now it is close to completion , let see how it goes from here .
Next week Treasury will sell $80 billion in bills .
Any rate rise will cause bond price to go lower , because bond holders will sell their existing bond for new higher yielding bonds . Since there is a growing expectation that interest rate will increase in future , right now this may be the next big thing  for US Treasuries .

NOTE :  Please see the disclaimer below this blog .

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