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Weekly Treasury & Bond market review after 2nd September, 2011.



This week one of the better news came from US, as I read somewhere that US is planning to sue major banks for misrepresenting the quality of mortgages they sold during housing bubble. I think it is long due, they must pay for their works. US Treasuries Yields were flat this week except in the last day, that is quite understandable as bad employment report forced investors to take shelter under US Treasuries.

Yields
2nd-Sep, 2011
8/26/2011-9/2/2011
8/19/2011-8/26/2011




2-Year Treasury
0.193
-3.50%
4.16%
5-Year Treasury
0.861
-13.46%
11.42%
10-Year Treasury
1.984
-9.90%
6.58%
30-Year Treasury
3.298
-7.17%
4.77%


Though demand for Italian Bond & Spanish Bonds were lower than expected in auction but authorities must be in a better position as Yields were in lower side than past, look like the ECB’s Bond purchase (Italian & Spanish) is working for them.
But things were not same for Greece as their 2-Year Government Bond Yield rose to more than 46% yesterday, which is Euro-era high. Many are saying that pause in talks between ECB, EU and IMF are the main reason of this surge, but their reform goals which Greece missed to fulfill may also be the cause.


Coming week

Last day’s movements towards safe heavens again reflect investors mind. So in coming days if there is not any change in the situation then this trend will continue. Beside US Treasury, demand for other safe heavens like German Government Bonds can be more in coming days.
2-Year Treasury Yield rose in last day from it’s lowest point and in the upside 0.25 can be it’s next resistance. But things were not same for 5-Year Treasury Yields, as it couldn’t come up from it’s low points. Look like at 1.00, it is getting hard resistance. Same goes true for 10-Year Treasury Yield as it was unable to come from it’s low points. 2.30 level may act good resistance for it. 10-Year Treasury Yield is breaking all it’s low points and who knows where it is heading for !   Things were not different for 30-Year Treasury Yield, as it will may face resistance at 3.60 level.

Disagreement over talk about Greece, regarding deficit target needs some solution as Greece gets some time for it. In spite of cabinet approval German chancellor’s plan to expand Euro-Zone bail-out fund may get some obstacles from Merkel’s own party. On the other hand Portuguese Government’s plan for spending cuts and higher tax rates look better, but there is still confusion about their implementation as protesters are gaining strength. We cannot forget that many countries (especially the problematic countries) need to issue more Bonds in coming future so low demand in auction can be a big trouble for them. Things can be more problematic in Europe after yesterday’s job report.

Remember Sub-Prime home loans ?  Yes that same Sub-Prime home loans that created the whole situation, is again coming into the picture. I have a doubt about the truth of this news but I read somewhere that S&P is again giving highest ratings to these things. What is going around !  Are we going to see another Sub-Prime crisis, especially in a situation when US has been downgraded from AAA rating, bad employment report, reduction in GDP……………………….. !




NOTE :  Please see the disclaimer below this blog .


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