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Week ended 12th August, 2011 – Treasuries & Bonds this week.


When I was watching the US Treasury sell figures, it looks to me that downgrade was unable to effect much at least in initial days. On the other hand it is saving US taxpayer’s money by selling Treasuries at lower Yields.

Yields
12th-August-2011
8/5/2011-8/12/2011
7/29/2011-8/5/2011




2-Year Treasury
0.192
-33.56%
-18.82%
5-Year Treasury
0.957
-23.62%
-7.25%
10-Year Treasury
2.249
-12.35%
-8.19%
30-Year Treasury
3.724
-3.27%
-6.73%

ECB’s step to control Euro-area debt problem by buying bonds of Italy and Spain was good but I have still doubt about it’s long-term solution. Anyway for short-term it has an effect on reducing bond yields.
Italy’s new austerity measures may be painful but it was a good step towards betterment of Euro-area as a whole. This week main attraction was in France, there was, may be a rumor that France may be the next victim of downgrade from AAA rating. I do not have much idea but it is sure there growth figure needs to be more so that we can differentiate between France & those problematic Euro-nations.


Coming week

Some are saying that lower interest rate upto 2013 may force investors to go for long-term Treasuries. During last few weeks most of these Treasuries saw some quick fall in their respective yields, now after such a fall yields we may expect some rebound in coming days.

2-Year Treasury Yield got some support during last 3 days at 0.18. It has a resistance at 0.35 and then at 0.50 level.
5-Year Treasury Yield broke it’s past support of 1.00 but it got the support below it. Like 2-Year Treasury Yield it can also bounce back. It has a resistance at 1.50 level.
10-Year Treasury Yield broke it’s support at 2.4 and it got the support at 2.10 level, it has a resistance at 2.80 level.
30-Year Treasury Yield got good support at 3.50 level. If Yields go up from here it will find resistance at 3.90 level and then at 4.10 level.

There is still confusion about joint Bond selling by Euro nations. What I think that in this moment it is very necessary for Euro-nations to ban these rating agencies to protect themselves.
I don’t know whether US authorities will take any action against S&P for their mistake but in future if better economic reports don’t come from US then other rating agencies may change their views. In today’s world finance & politics are so closely connected that every country must look closely on every incidents both inside and external. Things may be very challenging in coming days, especially for those countries which are getting AAA rating.



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