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31 Mar 2015
Treasuries remain overbought – RBS
FXStreet (Barcelona) - William O'Donnell, Head of US Treasury Strategy at RBS comments on the month end buying behaviour on front end rates, and further gives the technical outlook for 2s, 5s and 10s treasuries.
Key Quotes
“Month ends over the past 12 months have really brought in the front end buyers, perhaps at the expense of the back-end of the curve since the 5's-30's curve has tended to steepen into and just after month end. For example, 2yr yields have fallen 92% of the time on month end over the past year—by an average of 1.9bp. For 10's and 30's, month end performance has been nothing more than a coin flip statistically.”
"Digging deeper, we tend to see 2yr notes completely give back their month-end gains two sessions into the new month, on average, with 2yr yields rising ~1.9bp on that day (2y rates have risen ~85% of the time 2 days after month end).”
“I mention this because the recent month-end patterns have been pretty clear and because 2's are looking a bit overbought and sit pretty close to solid resistance ~52.8bp.”
“It may behoove the tactically minded to let some front end go if we rally much further from here today or tomorrow.”
“2s (0.563%)- 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 mixed/bullish and back near overbought readings again.”
“5s (1.49%)- 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 overbought and mixed/aimless.”
“10s (1.95%)-Next resistance comes in some congestion in and around 1.80% then the low yields of 1.64%. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is overbought and still mixed.”
Key Quotes
“Month ends over the past 12 months have really brought in the front end buyers, perhaps at the expense of the back-end of the curve since the 5's-30's curve has tended to steepen into and just after month end. For example, 2yr yields have fallen 92% of the time on month end over the past year—by an average of 1.9bp. For 10's and 30's, month end performance has been nothing more than a coin flip statistically.”
"Digging deeper, we tend to see 2yr notes completely give back their month-end gains two sessions into the new month, on average, with 2yr yields rising ~1.9bp on that day (2y rates have risen ~85% of the time 2 days after month end).”
“I mention this because the recent month-end patterns have been pretty clear and because 2's are looking a bit overbought and sit pretty close to solid resistance ~52.8bp.”
“It may behoove the tactically minded to let some front end go if we rally much further from here today or tomorrow.”
“2s (0.563%)- 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 mixed/bullish and back near overbought readings again.”
“5s (1.49%)- 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 overbought and mixed/aimless.”
“10s (1.95%)-Next resistance comes in some congestion in and around 1.80% then the low yields of 1.64%. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is overbought and still mixed.”