9 Dec 2014
Return to 2.40% yields likely for the10yr US Treasury Notes – RBS
FXStreet (Barcelona) - William O’Donnell, Head of US Treasury Strategy at RBS notes that the return to 2.40% is likely for the 10yr notes, currently near 2.25%, trading in the 2.15% - 2.40% range since the middle of October.
Key Quotes
“On an outright basis, 3yr yields are close to good support (~1.10%) derived by the mid-September lows and of course the $1bn cut in monthly issuance is a positive for the Dutch Auction process. The average tail for the past 6 auctions is 0.0 so I think there's a decent chance that this auction comes slightly through the 1pm level today.”
“I'm glad we have auctions this week because I'm running out of ways to describe a 10yr note trading near 2.25%. Ten year Treasury yields have been between 2.15% and 2.40% since the middle of October and here in the middle of that range it's hard to have a lot of conviction. Daily momentum studies still aim bearishly but the front end (2's and 3's) is beginning to look oversold after the recent bear flattening. This is why I throttled back the conviction level in our tactical bear call this morning.”
“I still think a return to 2.40% 10yr yields is likely but if the front end drops anchor due to oversold conditions, that level should be tougher to achieve. We'll just have to see how it goes with this week's auctions and retail sales on Thursday and U-Michigan long term inflation expectations on Friday. The FX and global equity markets are where the action is right now with Treasuries relegated to bystander status for the moment. Sighhh..”
Key Quotes
“On an outright basis, 3yr yields are close to good support (~1.10%) derived by the mid-September lows and of course the $1bn cut in monthly issuance is a positive for the Dutch Auction process. The average tail for the past 6 auctions is 0.0 so I think there's a decent chance that this auction comes slightly through the 1pm level today.”
“I'm glad we have auctions this week because I'm running out of ways to describe a 10yr note trading near 2.25%. Ten year Treasury yields have been between 2.15% and 2.40% since the middle of October and here in the middle of that range it's hard to have a lot of conviction. Daily momentum studies still aim bearishly but the front end (2's and 3's) is beginning to look oversold after the recent bear flattening. This is why I throttled back the conviction level in our tactical bear call this morning.”
“I still think a return to 2.40% 10yr yields is likely but if the front end drops anchor due to oversold conditions, that level should be tougher to achieve. We'll just have to see how it goes with this week's auctions and retail sales on Thursday and U-Michigan long term inflation expectations on Friday. The FX and global equity markets are where the action is right now with Treasuries relegated to bystander status for the moment. Sighhh..”