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Weekly Treasury & Bond market review after 21st October, 2011.


Greek parliament gave final approval to the austerity measures but protesters are getting stronger. Though Greece will get 5.8 billion Euro loan but there are still confusions regarding future loans and especially about the write-downs. Somewhere I was reading that to reduce debt further they need larger private sector contributions, so some negotiations is needed. Markets want to be sure that whether banks will agree to take more than 21% loss ?
This week a report indicated that China has reduced it US Treasury holding, but it will be wrong to take an impression from this, because it doesn’t include the buying from London.

Yields
21st-Oct, 2011
10/14/2011-10/21/2011
10/7/2011-10/14/2011




2-Year Treasury
0.271
-0.74
-7.87
5-Year Treasury
1.067
4.47
3.13
10-Year Treasury
2.22
1.37
8.32
30-Year Treasury
3.27
-1.01
7.22

Different opinions are coming about the operation Twist, whatever it is, authorities are mostly looking for liquidity in the system. So they will try to do that by different methods, which are suitable for them. Treasuries are not showing any major movement this week.



Treasury & Bond Market forecast for coming week


Tomorrow’s meeting and then on 26th October are very crucial for different markets. If those remain good then we may expect fall in the value of Bonds and Treasuries.
Last week I was expecting that 2-Year Treasury Yield may test higher levels but it was flat this week. It respected both it’s resistance of 3.00 and support of 0.26 level. In coming days if it breaks 0.235 level then it can drop more. On the upside if it breaks 0.35 then it can rise more.
I was expecting same type of movement from 5-Year Treasury Yield. It maintained it’s support of 1.00 level. Though it tested higher levels in last two days but those moves were not much. 1.25 is a good resistance for it. If it breaks that then it can test 1.50 level.
2.30 is a good resistance for 10-Year Treasury Yield, look like it will take time to break that. If it breaks that then it can test higher levels of 2.60. It has a support around 2.00 level.
3.30 level is the resistance for 30-Year Treasury Yield, if it breaks that then it can test 3.60 level. It has a support around 3.00 level. It has a chance to test higher levels.

As I previously hinted about the difference between Euro-zone member countries, some are saying that that is reason why they will again meet 26th October. Problem is, about increasing the size of bailout fund. I think, many of us know that here Germany has a limitation of 211bn Euro, so it is a matter to see that how they are going to increase the size of the fund !  Though Germany has doubt about the impartiality of converting the EFSF into a bank, but I think they may think this French proposal as an alternative. Gradually France is getting the heat as we have seen that their banking shares have tumbled now their Bond spreads are getting Euro-era highest level against German bunds.
Some are expecting good things in coming days as they are saying that confusions are less now on different subjects. I saw somewhere that Black Rock, bought Italian bonds. Now this kind of thing can create good expectations.
I read somewhere that in US, some evidences are showing that there are rising trend of inflows towards higher Bond yields, fund managers are even talking about lower rated companies, if this is true then it is sure that investor’s risk appetite is rising.




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