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Treasury & Bond market review (weekly), after 13th January, 2012.


I don’t know whether it is good news or one of the worse that Germany sold their 6-month Bonds at negative yields! What I think everyone is so scared that they are now not ready to take any chance, especially when consider the total bids for that auction. On the other hand Bond auction of Italy and Spain showed better pictures this week, though in last day it was not better. Confusion is still there about private participation in Greek debt restructuring, which really can create problems in future.
Obama notified congress about the proposal of increasing the debt ceiling by $1.2tr. But as I read somewhere that it may act as a weapon for opposition.

YIELDs (US)
13th Jan, 2012
1/6/2011-1/13/2012 (%)
12/30/2011-1/6/2012 (%)




2-Year Treasury
0.225
-12.11
7.11
5-Year Treasury
0.791
-7.38
2.64
10-Year Treasury
1.868
-4.55
4.59
30-Year Treasury
2.913
-3.35
4.36

In the last day of the week, rating downgrade threat helped US Treasury yields to see lower levels. Treasury yields are showing volatile nature, one week they are showing positive closings and next week they become negative.



Treasury & Bond market forecast for coming week.

It is sure that in coming week we may see investments are coming in safe havens like US Treasuries. During couple of months US Treasury yields were making lower highs and lower lows but now it looks to me that most of the US Treasury yields make multiple tops and bottoms, so it is getting very hard to decide which way they are going to move. On the other hand for medium time frame, it looks to me that they may rise suddenly.  Since S&P cut the ratings of France and others so there is more chance that US Treasury yields will drop from here. Looks like it is be better for this moment to get answer from the macros. It is sure that rating downgrades are making things harder, but I think that this phase of rating downgrades have already been discounted in the prices. Though in coming days for those Euro nations which are going to sell bonds may feel the heat of S&P rating downgrade, so it is expected that we may see higher yields for those auctions and in the contrary German Bond yields may reduce more.

Last week it looked like that 2-Year US treasury Yield may test 0.30 levels but it got resistance at 0.26. In the upside if it breaks that then it can test 0.30 levels. In the downside it has strong support at 0.15, as situation is going on it has more chance to test lower levels.
For 5-Year US Treasury Yield, as I said in last week that it is still following the bearish pattern. There is more chance that it will drop from this level. But if it somehow manages to go up then there is a resistance first at 1.00 and then at 1.20.
So 10-Year US Treasury Yield is still not out of its bearish trend. In coming days it will find support at 1.70 range. In the upside it has resistance at around 2.30-2.40 level.
Last week I was telling that 30-Year US Treasury Yield will clearly break the trend if it breaks 3.10 levels, but it failed to do that. Now it has more chance to drop more as it is not yet out of that bearish pattern which I talked during last few weeks. Somewhere I saw that there is less demand for 30-year US Treasuries, so I will be watching this very carefully.


Few days ago I was reading a report which says Euro zone’s problem is recovering but in reality still I don’t see any sign of that. Especially when I see that there is a chance of overnight deposits with ECB may hit 500bn euros in coming days. This is because banks still prefer the safety of the central banks for the matter of perking their funds instead of lending others. Is this a sign of economic recovery!  



NOTE :  Please see the disclaimer of this blog. 

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