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25 Feb 2015
Overbought treasury market at the beginning of a correction? – RBS
FXStreet (Barcelona) - William O’Donnell, Head of US Treasury Strategy at RBS, comments on the treasury market and further shares the key technical levels for US treasuries, waiting for further evidence before a correction can be signaled for the depressed Treasury yields.
Key Quotes
“…I wait for signals that this deeply overbought Treasury market is at the beginnings of a correction? Well, in a nutshell... I'm anticipating an even longer wait for that moment when we have more evidence that the foot is off the proverbial neck of these depressed Treasury yields.”
“It's just hard to be bearish on US rates when inflation trends are still downward (transitory as that trend MAY be) while Germany just auctioned 5yrs at negative yields for the first time.”
“Short term momentum studies now aim toward even lower Treasury yields and I don't think it's a stretch to envision that long end rates test new move lows in this environment.”
“Rather than play for that, I think it best for longer-term players to sit tight to your duration bogey to see how this all plays out.”
“2s (0.593%)– Next major support doesn't emerge until ~0.80% where we found buyers back in the spring of 2011. Resistance seen at 0.40% where we'd close a gap left behind in late October. Daily momentum is bullish.”
“5s (1.45%)– Next major support comes in at 1.80% and just above. Next resistance begins at ~1.30% and extends down to major resistance at 1.15%. Daily momentum is bullish.”
“10s (1.97%)–Next resistance comes in at ~1.96%, the Feb 12th lows that we recently rebounded off of. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is bullish.”
Key Quotes
“…I wait for signals that this deeply overbought Treasury market is at the beginnings of a correction? Well, in a nutshell... I'm anticipating an even longer wait for that moment when we have more evidence that the foot is off the proverbial neck of these depressed Treasury yields.”
“It's just hard to be bearish on US rates when inflation trends are still downward (transitory as that trend MAY be) while Germany just auctioned 5yrs at negative yields for the first time.”
“Short term momentum studies now aim toward even lower Treasury yields and I don't think it's a stretch to envision that long end rates test new move lows in this environment.”
“Rather than play for that, I think it best for longer-term players to sit tight to your duration bogey to see how this all plays out.”
“2s (0.593%)– Next major support doesn't emerge until ~0.80% where we found buyers back in the spring of 2011. Resistance seen at 0.40% where we'd close a gap left behind in late October. Daily momentum is bullish.”
“5s (1.45%)– Next major support comes in at 1.80% and just above. Next resistance begins at ~1.30% and extends down to major resistance at 1.15%. Daily momentum is bullish.”
“10s (1.97%)–Next resistance comes in at ~1.96%, the Feb 12th lows that we recently rebounded off of. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is bullish.”