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Weekly Treasury & Bond market review after 16th September, 2011.


“Greece is Europe’s Lehman” or “Greece is out of EURO” many expected that this is going to be the headline in coming days but thanks to some better speeches from German and French leaders. The steps of central banks were good but I have doubt about it’s long-term effect. It will be better if central banks took some measures about the rating agencies.

I think the matter which is disturbing was the statement from Greek official that, Greece has cash to operate unto October. These things created lot of panic in early days of the week, as Greek notes went over 60% for the first time though later it went more. Still it is not clear to me, the presence of US Treasury secretary in the meeting European leaders, in Poland. Geithner said that EURO needs to fix the problem, where as Austria’s finance minister criticized him for lecturing the Euro zone. Look like time has come to pull each others leg.

Yields
16th-Sep, 2011
9/9/2011-9/16/2011
9/2/2011-9/9/2011




2-Year Treasury
0.17
0.59%
-12.43%
5-Year Treasury
0.916
13.93%
-6.62%
10-Year Treasury
2.053
3.63%
-0.15%
30-Year Treasury
3.313
2.09%
-1.60%


In the early days of the week US Treasuries rose but later there were not much movements. Somewhere I saw that foreign buyers can directly bid for US Treasury, I don’t know, are they smelling something in advance ?
China news helped to reduce the cost of borrowing of Italian Bonds but later statement of Chinese president clear the cloud. Meanwhile Moody’s maintained it’s negative review on Italy’s sovereign debt.


Market forecast for coming  week

In coming days Greece may going to take some hard measures to secure the bail-out money. Pumping of dollars into European banking system may reduce the demand for safer assets for short-term, so we may expect a rise in yields of Treasuries and Bonds.
1.00 is acting as good immediate resistance for 5-Year Treasury Yield and for 10-Year Treasury Yields  2.30 is acting as strong resistance. If it able to break that then 2.40 will be it’s next target. For 30-Year Treasury Yield resistance levels are at 3.40 and 3.70.

I think it is very hard to say for sure that we are going to see Lehman like collapse because we cannot forget that some big countries, better to say some big banks from Germany and France are holding huge amount of Greek government bonds. So in this circumstances if something bad happens with Greece, then what about them ?
Some experts are talking about necessity of defaults by problematic countries,  I don’t know why they are saying that !  forget about PIGS, can we imagine a financial world where US cannot pay it’s debts !
What problematic countries need, is more cash and I don’t think meeting in Poland has shown anything in this respect. Now collateral thing may make a problem for Greece in it’s next payment.





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