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Treasury & Bond market review (weekly), after 3rd February, 2012.


I read somewhere that Portuguese finance minister said Bond yields of secondary markets don’t reflect fundamentals, as such these are not reflecting their progress. As I said in my last week review that Portugal may be next and their Bond yields are not performing like others. Bond yields of different Euro zone countries like Italy, Spain dropped this week and their auction showed better results. Demand for Bonds of these countries has increased; it reflects that QE-1 of Euro zone is working quite well. I think to some extent environment is reflecting lower risk.

Better employment report effected US Treasury yields very much in the last day of the week; as such 10-year US Treasury saw a big sell-off.

YIELDs (US)
3rd Feb, 2012
1/27/2011-2/03/2012 (%)
1/20/2011-1/27/2012 (%)




2-Year Treasury
0.234
8.84
-11.16
5-Year Treasury
0.771
2.94
-15.65
10-Year Treasury
1.923
1.58
-6.56
30-Year Treasury
3.12
1.96
-1.35

Though there is no sign of official QE-3 from US Fed or Bernanke, but some regional fed authorities have different opinions about it.



Treasury & Bond market forecast for coming week.

I think we may not see much reaction from the Greek news, may be market is already discounting that. As we can see that even in the last day Italian & Spanish Bonds were affected by the uncertainties from Greece. So things can continue in coming week until something comes from Greece.
In coming days long-term US Treasuries may be affected by the operation Twist. As I said in past that US Treasury yield is giving one negative week then one positive week, so if it follows that then coming week will be negative for US Treasury yields.

2-Year US treasury Yield is following the same range of 0.22 to 0.26. If it follows its past trend then it will drop in coming days. In the downside it has a good support at 0.20, if it breaks that then it can drop more. If it able to break 0.26 then it can touch 0.30 levels.
In the last day of the week the move of 5-Year US Treasury Yield was good. Now it has a chance to test 0.90 in the upside but if it breaks 0.70 then it will make new lows.
10-Year US Treasury Yield got good support at 1.80 ranges. Now it has a range of 2.1 in the upside and around 1.70 in the downside.
3.10 is an important level for 30-Year US Treasury Yield, if it breaks that then there is a resistance around 3.40 level. In the downside 2.80 is good support for it, though it has a chance to break that level.

Outcomes from Greece are going to affect other problematic countries of Euro zone. I saw somewhere that Krugman said that Greece will default on their debt and he also suspect about leaving Euro. If that becomes true then we must also think about Portugal and irelandsssssssssssss


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