22 Dec 2014
Treasuries to remain overbought – RBS
FXStreet (Barcelona) - William O’Donnell, Head of US Treasury Strategy at RBS, notes that treasuries continue to remain overbought and expects them to remain the same as US-Bund 10y yield spread is close to the widest levels observed since the summer of 1999.
Key Quotes
“Rates technicals continue to show overbought conditions but there are no signs that yields are poised for a sustained rebound.”
“Meanwhile, Treasury yields continue to look cheap to Germany and Japan with the US-Bund 10y yield spread close to the widest levels observed since the summer of 1999. So there's reason to expect that US rates can stay pinned at overbought levels for some time to come. Indeed, German 10yr yields have been welded to the 0.60% level for a week as traders hold breath over an ECB sovereign QE announcement next quarter.”
“The path that long-end Treasury yields take next year may be as much influenced by what the ECB does or doesn't do as they will be from Fed action or inaction.”
“2s (0.642%) – Next major support doesn't emerge until ~0.80% where we found buyers back in the spring of 2011. Resistance seen at 0.47% and then at 0.40% where we'd close a gap left behind in late October. Daily momentum is mildly bearish now.”
“5s (1.65%) – Next support comes in at 1.70% (where we December 8th) and then it gets stronger at 1.80% and just above. First resistance emerges at 1.47% and then major resistance lines up at ~1.27%. Daily momentum is mildly bearish.”
“10s (2.17%) –Next major resistance comes in at the flash crash lows ~1.86%. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is mildly bearish.”
“30s (2.77%) – Bonds don't have any solid support until 3.105%, the November "lows." Next resistance is at ~2.50%, the all-time rate lows for bonds. Daily momentum is still bearish.”
Key Quotes
“Rates technicals continue to show overbought conditions but there are no signs that yields are poised for a sustained rebound.”
“Meanwhile, Treasury yields continue to look cheap to Germany and Japan with the US-Bund 10y yield spread close to the widest levels observed since the summer of 1999. So there's reason to expect that US rates can stay pinned at overbought levels for some time to come. Indeed, German 10yr yields have been welded to the 0.60% level for a week as traders hold breath over an ECB sovereign QE announcement next quarter.”
“The path that long-end Treasury yields take next year may be as much influenced by what the ECB does or doesn't do as they will be from Fed action or inaction.”
“2s (0.642%) – Next major support doesn't emerge until ~0.80% where we found buyers back in the spring of 2011. Resistance seen at 0.47% and then at 0.40% where we'd close a gap left behind in late October. Daily momentum is mildly bearish now.”
“5s (1.65%) – Next support comes in at 1.70% (where we December 8th) and then it gets stronger at 1.80% and just above. First resistance emerges at 1.47% and then major resistance lines up at ~1.27%. Daily momentum is mildly bearish.”
“10s (2.17%) –Next major resistance comes in at the flash crash lows ~1.86%. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is mildly bearish.”
“30s (2.77%) – Bonds don't have any solid support until 3.105%, the November "lows." Next resistance is at ~2.50%, the all-time rate lows for bonds. Daily momentum is still bearish.”