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Treasury & Bond market review (weekly), after 25th November, 2011.


If not S&P, there are others like Moody’s who can downgrade. It cut Hungary’s credit rating because of higher debt level and weak growth forecast. Hungary’s weaker currency is one of the causes of its rising debt. Now it will be very interesting to look, how they approach the matter with IMF and EU. Many must be looking whether Hungary change their banking policies.
There was not much to say about US, as many were sure about the outcomes from congressional committee. US Treasury market face some sell-off in the last day of the week, otherwise market was flat this week.

Yields (USA)
25-Nov,2011
11/18/2011-11/25/2011 (%)
11/11/2011-11/18/2011 (%)




2-Year Treasury
0.275
-2.48
24.77
5-Year Treasury
0.933
1.85
1.21
10-Year Treasury
1.964
-1.94
-2.38
30-Year Treasury
2.921
-2.43
-3.66

Many were surprised by the Germany’s failure to get bid for Bonds; everyone is telling that if the strongest nation faces this difficulty then what about others! Spain’s new popular party failed to do any miracle to reduce the borrowing cost. This week Italy also paid higher interest in the auctions, but they must be happy by looking at the demands of their Bonds. Now more or less most of the countries are paying 5% and above yields, this looks quite interesting comparing the ECB’s rates. I think this is one of the reasons which Germany are not reacting positively for Euro-bonds.

This week was full with news of rating downgrades and threats; S&P cut the Egyptian sovereign debt rating and gave indication of future lower sovereign ratings for Japan. Fitch cut Portugal’s debt ratings, where Moody’s warned about France’s credit ratings.



Treasury & Bond Market forecast for coming week

Markets were flat this week, in fact during some weeks. Situation in Europe says that US Treasury price will increase in coming days, but some of the charts of US Treasury say that yields can test higher levels. If we compare the coming month with earlier two years then it shows that Treasury market is going to face sell-offs.
During last few weeks 2-Year Treasury Yield was showing flat movements. It is still in that 0.20 – 0.30 range. From July, 2011 it is following a trend line, which it never crosses. If it still follows that trend line then in coming days it will drop from this level. Otherwise if it breaks 0.30 range then it can test 0.35 level.
Except in the month of October, 5-Year Treasury Yield is showing quite same kind of movement from the middle of August. 0.80 – 1.00 range is acting as an important level for it. Now if I try to draw a trend line from April, then it says that yield will not hike more than 1.00 level in coming days. If it breaks that trend line then it can test 1.20 level.
This week 10-Year Treasury Yield tried to break 2.00 level but it was not showing much of weakness, as such it returned backed from 1.88 level. If I draw a trend line for 10-Year Treasury Yields from July, then it shows that in coming days it can test around 2.20. Now this in turn reflect that 10-Year Treasury Yield dropped more compare to others. If it drops from this level then it can test its recent low of 1.71 level.
Last day I said that 30-Year Treasury Yield may test 2.80 support level, it just came back from that level. From July, 2011 if I draw a trend line then it says that 30-Year Treasury Yield may rise near about 3.20 level. I am not sure but chart pattern says that it is trying to make a pattern which reflects more chance of up move from here. Now if it does the opposite then it may drop far below than 2.80 level.
Treasury will sell $56bn short-term bill in Monday and Italy plans to sell 8bn euro bond at an auction in Tuesday. In fact Belgium, France and Spain all are going to sell bond in coming week, considering the fact of German sale this week. Now it will be interesting to see what price they have to pay for their sale. Everyone is expecting that they have to pay more.
Reduction in net present value of Greece’s new Bonds is another matter of concern but I am interested to know about their EU aid. What I think if rates stay in these levels for more time, then financial world must be suspecting about Euro-zone Bonds. Many are suspecting what will be the situation if investors don’t want to lend in future!

NOTE :  Please see the disclaimer of this blog .



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