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Week ended 3rd June, 2011 – Treasury & Bonds this week .

US now is facing a big problem and may be whole financial system of the world can be in a trouble spot. This week Republicans in US House have rejected the bill to raise the US debt limit, so they have no other way than to do spending cuts. Now things will be critical for US, not only  because Moody’s warning of rating downgrade of US debt if congress fails to raise debt but also due to Treasury department’s warning of default if congress does not authorize more borrowing in August.

Russia has done quite a different thing from others they rose the deposit rate to control the inflation rather than hiking the repo rate. The simple reason for that is, they do not want to disturb the growth of the economy. Up until now most people knew about the US rating agencies, but they have to refresh that , because Chinese official rating agency comes into the picture. This week they cut the credit rating of Greece, because of problem of repayment of debt and possible default risk. In early of this week Moody’s said that they are going to review the sovereign debt rating of Japan for possible downgrade. In last day of the week Japanese government bond yield dropped because of political tension.
In recent time Spanish economy has reflected sign of decoupling from other countries like Greece, Portugal and Ireland. Spain sold 3.953 billion Euro in short-term government bonds,  although rate was little higher side and that reflects Spain is still not completely out of the problems. Talking about the problem, in this moment it looks like that Greek problem has reduced a bit, as we got some news that Germany is considering to not to push for rescheduling of Greek debt. This week Greek bond spread narrowed bit with German bunds, indicating improved sentiment, as lot of talks are going on about new rescue package. 10-Year German Bund’s Yield rose to 3.06% level after America’s payroll data.

Coming week

10-year Treasury yield fell for the first time below 3% this year. Lot of buying in Treasury pushed it’s trading volume in highest level since February 2008.

Last day I said that I am expecting 10-Year Yield to break 3.00 level and it may get support at 2.90. This week it closed above 2.90 level. There is a scope for 10-Year Yield to go and test its lower support level at around 2.80, obviously if things become worse from here. It is wrong to think about it’s upside in this moment but if things suddenly changes it can move to test around 3.20 level first.
2-Year Treasury got some support at 0.45 level but this support is not much strong, the stronger one is at 0.35 (Week ended 3rd June, 2011 – 2-Year Treasury this week .). Last week I was doubtful about 5-Year Treasury’s more drop from this level, as mentioned that 1.70 is acting as good support for it, in fact 1.60 is working good for it. Now from here bad sentiment can take it to around near 1.30 level (Week ended 3rd June, 2011 – 5-Year Treasury this week . ). 2-Year & 5-Year Treasury is declining during last 8th week, it is quite long now.

30 Year Treasury yield is moving around 4.10 to 4.30 level. In the upside it is getting some good short-term resistance at 4,25 level. unless it crosses 4.30 level, I am not very confirm about its up move. Though there is a chance for all these Treasury Yields to go down from here in coming week, but we cannot forget that short-term profit making may change the picture.
Treasury plans to sell $117 billion bill, notes and bonds in next week.

Sentiment is bad and it will be worse if QE-3 is not there. I am doubtful about this spending cuts. Sometime I feel that all these things which are going on now is just something  which someone wants to happen. The main matter  is scopes are limited without QE-3 and ultimately it is going to come.

NOTE :  Please see the disclaimer below this blog.

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