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Treasury & Bond market review on 26th August, 2011.



Market was not disturbed by Bernanke’s speech, Treasury Yields were flat this week but things were not same for Greek Bond Yields as it is still rising. Nearly after 4 weeks Treasury Yields gave positive closing on weekly basis.

Yields
26th-August-2011
8/19/2011-8/26/2011
8/12/2011-8/19/2011




2-Year Treasury
0.2
4.16%
0.00%
5-Year Treasury
0.995
11.42%
-6.68%
10-Year Treasury
2.202
6.58%
-8.13%
30-Year Treasury
3.553
4.77%
-8.94%

Spain is giving response to German and French call of solving Euro debt crisis but thing are not going easily for Greece as demand for collateral on their loan may create problem.

Large budgetary deficit and rising debt limit, were the causes to cut sovereign rating of Japan by Moody’s. I think their political problem has a big contribution on it and unless it recovers, things are not going to improve in near future. In the later days of this week Bond Yields rose as investors shifted to riskier assets.


Coming week

During last few weeks Treasury Yields were not showing any major movements, market is in uncertain zone so this kind of things are quite expected. For some Treasury Yields there is not much solid ground to compare as some are in their lowest levels, though I can talk about their resistance from here.
 1.30 is the immediate resistance for 5-Year Treasury Yield. 2.50 and the 2.70 will be the resistance for 10-year Treasury Yield. 3.75 is the initial resistance for 30-Year Treasury Yields and then 3.95 level.

Greece is not only facing the collateral problem but that crucial Bond swap is also not going well as government has demanded 90% participation from private sectors, which sounds too optimistic.
Bernanke expected for better growth in 2nd half of this year and he said Fed may help in this recovery if needed. One thing is sure to me that the option for QE-3, is still on. We may know details about Fed future action in next September meeting.

Sometimes a question comes in my mind, about the importance of QE-3 !
When US is getting regular liquidity in Treasury market and when there are countries like China and Japan, who are the fixed long-term buyers of these Treasuries in spite of problems like S&P downgrade, then at some point of time a  question must come about the necessity of QE-3.



NOTE :  Please see the disclaimer below this blog .



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