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Week ended 8th July, 2011 – Treasuries & Bonds this week .

After last week’s sell-off many investors were expecting that bull run for Treasury market is over and their expectation were quite reflecting in the movements of Treasuries this week. But Friday’s bad job report removes that fear to some extent as investors were again taking shelter in Treasuries, reversing the trends which they did in early days of this week.


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

Raising interest rate by ECB to 1.5% was a crucial event but better news came from IMF, as Policy makers get more time after 3.2 billion Euro payment from IMF to Greece. Deficit cut is very crucial for Greece to reduce it’s debt, which can rise to 166% of GDP in next year. Rating agencies are making the problem worse as S&P warned this week that next bailout process would count as default. Portuguese Bond Yields rose much in the early days of the week due to Moody’s, which cut Portugal’s rating to junk. Not only Portuguese but Yields of other problematic countries have widened, the drops it made in last week are again rising.

This week, Spain sold €1.5 billion of Bonds maturing in 2014 with an average Yield of 4.291% and €1.5 billion of 2016 Bonds at 4.871% .
With the improve news about Greece focus is now shifting to Italy as their service PMI fell to 47.4 in early days of this week and their Bond Yields widened.
In the early days of this week Japanese Yields rose but later part of this week it eased. I was reading somewhere that someone from Japanese banking association was suspecting about reduction in purchase of government Bond by banks in future. Now this can be a big problem for them as I told it in one of my posting in few months ago.
This week, Moody’s made some suspicion about the debts of local governments in China .

Coming week

If things get bad 10-Year Treasury Yields can drop below 2.90 in coming days. If situation improves then it can test 3.20 level in the upside.
0.48 is acting as good support for 2-Year Treasury Yields, in the last day it dropped more. Now again 0.38 will act as support, if it falls from here it may drop more.
5-Year Treasury Yields got the resistance at 1.8 level. Now it gets support at 1.55 level. It’s trading range is  1.40 to 1.80 level.
30-Year Treasury Yields stopped below it’s resistance of 4.50 level.  Now 4.20 level is acting as good support for it, but the better one is at 4.10 level.
The Treasury plans to sell $117 billion next week in bills, notes, and bonds.
Who can say, may be this Friday’s job report brings new life in Treasury market !  Looking at the charts I think that market may be in pressure for few days now. To raise employment level, growth is much needed but few days ago fed has cut the growth target. So how things are going to improve ?  In this moment I have one answer,  QE-3 .

NOTE :  Please see the disclaimer below this blog .


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