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Treasury & Bond market review (weekly), after 17th February, 2012.


Spanish and Italian Bonds ended better this week but things were not good in early days of the week when Moody’s downgraded different nations. These Bonds performed better in later days because of good expectation from Greece. Hearing about the demands in Bond auctions, it looks to me that those are just defying the Moody’s cut, especially in the Portugal, where they sold 1.5 bn euros of 12-month Bill in lower yield than last auctioned in April, 2011.
Chinese statement about participation in Euro zone debt problem reduced demand for safer assets to some extent and in the later period it was hopes from bailout deal for Greece. US Treasuries were volatile this week.

YIELDs (US)
17th Feb, 2012
2/10/2011-2/17/2012 (%)
2/03/2011-2/10/2012 (%)




2-Year Treasury
0.292
6.57
17.09
5-Year Treasury
0.862
6.29
5.19
10-Year Treasury
2
1.32
2.65
30-Year Treasury
3.142
0.42
0.29

5 & 10 year US Treasury yield has quite similar run up in last two days of this week, 2-year US Treasury yield was flat in the later part of this week. I think that greater worry for US Fed is the reduction in Chinese treasury holdings in December, 2011.



Treasury & Bond market forecast for coming week.

Now Greek problem or better to say Euro zone debt problems are becoming very monotonous, as I said in past that investors fear that even Greek problems get some solution then who is next!  So I think this trouble will continue unless authorities see these as a whole. If temporary solution comes then safer assets may face lower demands in coming days.
I want to watch both 5 & 10 year US Treasury yields which are performing differently from shorter version of US Treasury yields. It may be that they are indicating changes in scenario!

Last week I was talking about a channel for 2-Year US Treasury Yield but looks like it is negating that. Now if it able to break 0.30 then it may get resistance at0.35. During couple of weeks it is following a rising trend so it may reverse its course, then 0.24 will be its support.

5-Year US Treasury Yield has increased in last two days, so if it continues its move then it will test 0.90 resistance level. But as I said in last week that it may be trying to create a falling wedge, so therefore it may fall. In the downside the immediate support level is at 0.80, if it breaks that then it may re-test 0.70 level.

If good environment comes then 10-Year US Treasury Yield will definitely test 2.10 level in the upside. But if things deteriorate from here then it will look for support at 1.90 level. From long time it is following a downward trend so if it breaks 2.10 then we may be getting a signal that it is trying to come out from that trend.

I don’t know that whether it will take more time or not but 30-Year US Treasury Yield still has a chance to break-out in coming days. In the upside that 3.40 resistance level is important for it. In the downside if it breaks 3.10 then it may test 2.90 level.


I don’t know what type of restructurings or swaps are coming for Greek Bond holders but that march 20 deadline (of 14.5 bn euro) is coming close, where we may or may not see the first sovereign debt default for Euro zone.


NOTE :  Please see the disclaimer of this blog. 

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