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Weekly Treasury & Bond market review after 28th October, 2011.


Soooo, Euro-zone bought more time. Greece problem is off for this moment but who will be next ?  Media is forecasting about Italy but I have different opinion, comparing it to the other PIIGs…. countries. Italy’s borrowing cost rose to a record high despite that deal and they failed to meet their borrowing target but the positive point about Italy is that, most of their lenders are domestic but for others like Greece it is external.
It looks like that rally in US Treasury is running out of steam after Thursday, as investors are little confused about some of the matters in Euro deal.


Yields
28th-Oct, 2011
10/21/2011-10/28/2011
10/14/2011-10/21/2011




2-Year Treasury
0.293
8.10%
-0.74
5-Year Treasury
1.135
6.37%
4.47
10-Year Treasury
2.326
4.77%
1.37
30-Year Treasury
3.382
3.42%
-1.01

I was reading a report; it says that foreigners are selling US Treasuries and agency Debt (on monthly basis). Now I am not totally sure about that report, but if it is true then it will be worse for US interest rates. Now Fed needs to buy government debts to support the market. Therefore we have to rethink about the purposes of QE-2 and operation Twist.



Treasury & Bond Market forecast for coming week

In coming days the problems in Italy may create some tension, especially about the resignation of their prime-minister. I don’t think Euro deal has properly reflected in the market, so there can be some reaction.
0.35 is a good resistance for 2-Year Treasury Yield but in this moment 0.30 is acting as a resistance for it. In the downside 0.23-0.24 is a support for it.
For 5-Year Treasury Yield the resistance level is at 1.50 areas, it has support around 1.00 areas. In this moment 1.25 areas is important for it, if it breaks that then it can rise more.
10-Year Treasury Yield is testing 2.30 levels, if it maintains that then it can go test 2.60 levels. It has a support at 2.00 levels. 10-Year Treasury Yield can face a new uptrend if it breaks 3.00 levels in coming weeks, but for now the level is 2.60.
3.30 levels is the resistance for 30-Year Treasury Yield, if it breaks that then it can test 3.60 level. It has a chance to test higher levels provided it stays above 3.30. It has a support around 3.00 levels.

They increased the size of the EFSF fund but, where from these funds will come !  Then comes the question that, will these amount will be enough, if countries like Italy, Spain come into the picture ?  If those big countries face the trouble in future then how they are going to again recapitalize the banks ?  I want to see how the other lenders outside Europe, like IMF reacts on those developments.
Now name of China is again coming into the Euro-area. As we know China is many way related to Euro-zone but question is if China helps them any way, then what it will be expecting in return ?


NOTE :  Please see the disclaimer of this blog .


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