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Weekly Treasury & Bond market review after 4th November, 2011.

Greece is facing all of type of problems, both economical and political. Early in the week their referendum created lot of tension in the financial market. Now after that victory in confidence vote next job is forming a national unity then ………… But when we will get some solution of this Greek problem !
Fear of Greek referendum creates lot of tension in the debt market especially in the initial days of this week. Most the Treasuries have shown same type of movements this week, yields were in lower position in the early days of the week.

10/28/2011-11/4/2011 (%)

2-Year Treasury
5-Year Treasury
10-Year Treasury
30-Year Treasury

Italy agreed to allow the IMF and EU to monitor their reforms; this is good news for outside world. As I said in last week that though media is highlighting Italian problem as bigger one considering the fact that it’s debt level is higher than Greece.  But still I think that problem in Greece is bigger because debts in Italy are mostly indigenous. Italy is paying highest borrowing cost since it joins EURO, but one of the biggest problems right now is the fate of Berlusconi. Previously we got news about MF global and now Commerzbank of Germany has reported a net quarterly loss because of write downs on Greek debt. On the other hand as I said in past that rising spread with German rates can be a threat for France, considering their AAA rating. So Euro-debt problem is harming everyone in the street.

Treasury & Bond Market forecast for coming week

Greek problem is far from reaching into a conclusion; uncertainties are rising day by day around Greece. So debt markets will be volatile with more chance of getting negative effects.
2-Year Treasury Yield got the support exactly where I said in last day, now if it breaks this range then it can test 0.20 level. On the upside it is getting good amount of resistance at 0.30 level, with minor resistance at 0.26 area.
5-Year Treasury Yield is testing a crucial support of 1.00 level; now in coming days if it breaks 0.80 level then it can drop more. As I said in last week that 1.50 area is still a target for it in the upside but before that it has to test 1.25 level.
If 10-Year Treasury Yield breaks 2.00 levels then it can drop more. On the upside it has resistance at 2.30 level.
As I said in last week 3.30 was good resistance for 30-Year Treasury Yield and it is now getting support at 3.00 areas and it can test level up to 2.80. Now we can only expect up move, if it breaks 3.30-3.40 level.
If I am not wrong, investors in Euro-area are getting negative interest rate or better to say they are paying for their deposits. Rate cut will be helpful for growth but it in turn can be a worse case for inflation in this area, which can rise more.
Markets are waiting to see whether Draghi gives more emphasis on intervention in the bond markets to stop spreading Greece’s problem in other problematic countries like Italy.
G-20 members are trying to increase the resource of IMF to support the problematic countries. Many are expecting something from China but how things can be so simple, when many in Germany are not interested to help the problematic countries.

NOTE :  Please see the disclaimer of this blog .


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