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Treasury & Bond market review (weekly), after 20th April, 2012.

Euro zone worries continued this with more active participation of Italy. The outcome of Spanish auction was good but they must be worried about those higher yields. The borrowing cost of Spain is rising during couple of months and this week it again created a bail-out situation, when it’s 10-Year Bond yield reached above 6%. German government Bunds dropped after investor confidence report but spread between German Bund yields and Spanish & Italian Bond yields are increasing. Europe governments were warned for relaxing, which may work in coming days and I think now the country heads should stop about predicting contraction.

US Treasuries hold their gains in starting of the week but later they declined due to good Bill auction in Spain, macro reports and lastly outcomes of G-20 meeting affected them.

20th April, 2012
4/13/2012-4/20/2012 (%)
4/5/2012-4/13/2012 (%)

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

Many US Treasury yields are facing 5 straight negative weeks. Retail sales in UK and German confidence report helped to compensate the disappointing US labor market report.

Treasury & Bond market forecast for coming week.

I think Spain needs time to enforce their reforms but for them time is very important, so in future I will not surprise if they take external help. Here I am still maintaining my past view that growth will hamper with those measures. In coming days France too may face the heat, because their election is going increase the uncertainties. In fact if I am not wrong there was news about French downgrade.
We may see better environment in coming days as IMF got $430 bn but is that enough! US Treasury yields are showing that in coming days yields may reverse their positions.

Last week I was suspecting that 2-Year US Treasury Yield will get good resistance at 0.26 level. It can go more in the downside but right now it is in very over-sold zone so a reversal in the upside is inhabitable. If I am not wrong it will try 0.30 level in the coming days but it may take time to break 0.32 level.

5-Year US Treasury Yield was flat this week. Considering the gap it created in the upside, I was expecting up moves in later period of this week, but it did not. So it may try that in coming days; therefore it will get resistance around 1.00 level. Since it is in very over-sold zone, so I am not expecting more drops from this level. But somehow if it breaks 0.70 then it will not react on that pattern which I mentioned in earlier weeks. I am still positive about that pattern which it can trigger if it breaks 1.20 in the upside.

I was expecting that 10-Year US Treasury Yield may not test 1.80 support level. It is also in very short-term overbought zone, so a reversal is due. Last week I was suspecting that it may try to fill up the gap which it has created in the upside, so that also supports the up move. In the upside 2.20 is a good resistance for it, if it breaks that then 10-Year US Treasury Yield will try 2.30 level. In the downside I am not expecting many drops from this level but if it breaks 1.70 in the downside then I will change my opinion about the bullish pattern which I said during last few weeks. Here I must say that, 10-Year US Treasury Yield may trigger that pattern if it breaks 2.45 –2.50 level.
Like others, 30-Year US Treasury Yield is also in over-sold zone and it is expected to fill up the gap which it has created in the upside. Therefore important resistance level is 3.30. I am still positive about its pattern and I think it can go around 4.00 level, if it triggers this pattern. I will change my opinion about the pattern only if it breaks 2.70 in the downside.

NOTE :  Please see the disclaimer below this blog.


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