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Weekly Treasury & Bond market review after 7th October, 2011.


ECB will be giving loans to banks and it will resume purchase of covered bonds to encourage lending, these were some better news that gave investors some relief to go for riskier assets. Though Yields pared their gains after Fitch ratings cut the long-term ratings of Italy and Spain. In the early days of the week markets were in some pressure when news about delaying Greece’s next installment of bail-out money came. Previously I heard that Greece needs the money by middle of October to avoid defaults but now it rises to November. I am little confuse about this difference !


Yields
7th-Oct, 2011
9/30/2011-10/7/2011
9/23/2011-9/30/2011




2-Year Treasury
0.292
17.74%
13.24%
5-Year Treasury
1.083
14.00%
10.59%
10-Year Treasury
2.078
8.68%
4.70%
30-Year Treasury
3.019
3.85%
0.41%

Payrolls report was a big surprise for many. I don’t think Treasury market was anticipating that in advance, because many were expecting bad payrolls reports. Since stock markets were in better condition so it is quite natural that some investments will shift from Treasury market.



Treasury & Bond Market forecast for coming week


Considering the operation Twist, it is expected that buying will come to those long-term Treasuries but when it will come, I am not sure about that, since there are lot of times in hand.  For short term Treasuries it is expected that yield will rise in coming days.


2-Year Treasury Yield broke the resistance of 0.26 and now trying higher levels. If things remain same it is going to test higher levels in coming days. It’s next big resistance is around 0.36 level. Same thing is also true with 5-Year Treasury Yield, it’s next resistance is at around 1.20 area and if it breaks that then it’s big resistance is at 1.40 level. 1.00 is a good support for it.
Last week I was telling that 10 & 30- Year Treasury Yields are making quite similar type of patterns. This week 10-Year Treasury Yield broke the pattern of lower highs and lower lows. It’s move surprised me as I was expecting yields to go down considering the operation Twist. Now it’s good resistance is at 2.30 level, though it broke the pattern but I will not surprise if it again goes down in coming days.
30-Year Treasury Yield is still following that pattern of lower highs and lower lows, now if it breaks level around 3.10 in coming days then it will break the pattern. If it breaks the pattern then it’s next resistance is at 3.40 level.


Treasury will sell $66 billion in Notes and Bonds next week.


We cannot forget that Greece wouldn’t meet this year deficit targets and it is not a good news. They may get the bail-out money in November but that cannot remove the basic problems. Recently they are taking some bold steps which may give them something to cheer in future. But still there are lot of confusions about matters regarding losses to private sector creditors and disagreement between members.
I don’t think that sudden better payrolls report can sustain this flow towards risky asset, what really needs is the repetition of this type of better reports. It is sure that sudden change in weather will remove some fear about imminent recession in both side of the Atlantic but ultimately it will follow it’s own track.


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