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Treasury & Bond market review (weekly), after 27th April, 2012.

S&P again downgraded Spain for the 2nd times this year and again this rating downgrade is creating a panic environment around the financial world. Italy was lucky that their Bond auctions especially in the last day were not affected by that downgrade. In the last day most of the Bond yields of Euro-zone nations were in higher side, except in Germany but these things were different in early to middle of this week. German Bund rose after a report showed that Euro zone economic confidence declined in April.
Last week I was talking about the political uncertainties due to French election but this week it came from Dutch side, as such it helped to increase the spread between 10-year Dutch Bonds and German Bunds into a 3year high.

In the earlier days US Treasury Notes rose on speculation of Bernanke’s statement. I am confused about his statement; it looks like that he is also not sure about the future.

27th April, 2012
4/20/2012-4/27/2012 (%)
4/13/2012-4/20/2012 (%)

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

US Treasury Notes advanced for 6th straight week, I was expecting a reversal from long-term US Treasury yields but they were mostly flat this week. I think anxiety over US economy is gradually increasing.

Treasury & Bond market forecast for coming week.

Out comes of French presidential election can be a trigger point for market, especially if any disagreement happens between big Euro-zone nations. In coming week Spain is going to auction notes and that may be a challenging event for them, here market will closely watch their yields. US Treasury yield is not showing any specific trend and it is in over-sold zone, so now a reversal is long due.

Considering its over-sold position, I was expecting an upside reversal for 2-Year US Treasury Yield but it was flat this week. It is getting a resistance around 0.268, from here it can go either side but due to technical over-sold condition, I am again expecting an upside reversal may be one or two days after. This 0.26 is a good support for it and if it breaks that then next support is at 0.22. In the upside it can get initial resistance at around 0.30.

Yet 5-Year US Treasury Yield did not fill up its gap, which I was expecting in later days of this week. It got a resistance at 0.845, from here it can correct little more, may be around 0.75. I am not expecting more than 0.70 because 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. But if it tries to go in the upside in coming week then it will get initial resistance at 0.90.

10-Year US Treasury Yield did not reverse its position; it is getting a resistance at around 2.00 level. Considering its over-sold zone, I am not expecting more drop in it. 10-Year US Treasury Yield may try up to 1.85 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. In the upside 2.20 is a good resistance for it but before that it has initial resistance at around 2.05.

Like others 30-Year US Treasury Yield did not reverse this week and now it is getting resistance at 3.15 level. It can drop more than other considering its position right now but I am not expecting level below 2.70 because in that case it will not trigger that pattern which can take it at around 4.00 level. It has initial resistance at 3.20 level and it can also try to fill up the gap in the upside.

Market is guessing about the announcement QE-3, I am not sure about the timing of that. Sometime I think that US authorities may use different techniques on this matter. They may introduce another TWIST type of operation or expand the limits of the existing one, which will end in middle of this year or they may introduce a new one! What ever it is, market has to wait until 20th July for further information on this matter.

NOTE :  Please see the disclaimer below this blog.


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