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Weekly Treasury & Bond market review after 18th November, 2011.


Situation is same in post Berlusconi era, at least for now, as Yield is again moving around that 7% level. It is good for them that they at least able to sell 3bn Euro, 5-Year Bond at 6.29%, which was a new Euro-zone record. This week, Spanish government Bond selling was not good, they did not able to raise the full amount. On the other side the French Bond selling was also not encouraging, their spread with German 10-Year Bonds were rising though in Friday it was in lower levels.
I read somewhere that guarantees provided by US lender in problematic countries rose by $80.7 bn to $518bn in first half of 2011, according to Bank for International Settlements. This week names of the two banks came into news, some are suspecting their exposure in debt of problematic Euro-countries.
US Treasury Yields hiked in the last day of the week as better news were coming both from US and that plan of ECB lending through IMF.

Yields
18-Nov,2011
11/11/2011-11/18/2011 (%)
11/4/2011-11/11/2011 (%)




2-Year Treasury
0.282
24.77
-3.41
5-Year Treasury
0.916
1.21
0.22
10-Year Treasury
2.003
-2.38
-0.67
30-Year Treasury
2.994
-3.66
-0.67

Long-term US securities saw $68.6 bn inflow in September, Treasuries saw most of these even compare to corporate Bonds. China and Hong Kong were decreasing their US holdings in past 9 months; on the other hand many like Japan and UK are hiking their investments. Quite large debt, I don’t know how they are going to pay that.



Treasury & Bond Market forecast for coming week


Now focus is on Spanish election in Sunday, but I don’t think there will be much change in scenarios from Italy and Greece. I will be looking on these new heads and how they use their magic sticks, if they have any !  What I think that this uncertainty will stay in the market unless some massive action is taken.
2-Year Treasury Yield is moving in that 0.20 – 0.30 range, if it able to break that 0.30 range then it can test 0.35 levels in the upside. In the downside if it breaks 0.20 then it may make new lows.
The move of 5-Year Treasury Yield was flat this week, looks like it is trying to make a base here. Now in the upside it has to face a resistance at 1.15 – 1.25 level and in the downside it has support at 0.80, if it breaks that support then it can drop more.
10-Year Treasury Yield is moving around that crucial 2.00 level, now if it drops from that level then it will test 1.80 level. In the upside it has resistance at 2.30.
3.40 is very important level for 30-Year Treasury Yield in the upside, now if it choose to drop from here then it will get support at 2.80 – 2.90.
As I said in last week that it will be problem for Italy if it has to pay higher rates in case of new Bonds, as we saw in case of that Monday’s issue. On the other side France is really worried about their AAA ratings, now will not it be surprising if in this moment France also wants ECB to purchase their Bonds too, to control their rising Yields ! 
I think now Euro-area debt situation is in a position where it needs joint efforts from different countries and organizations, but what can be an obstacle for that is “vested interest”. Last week I was talking about a Euro-Bond, I think that they are really thinking about that, but what they are waiting for is when to launch that !  Whether now or post Greek, .……….



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