?All We Need Is Just A Little Patience?
Today’s Spotlight Market
One reason why mid to long-term U.S. Treasury Yields have remained at relatively low levels despite a potential interest rate hike by the Federal Reserve some time this year is its ?attractiveness? to non-U.S. buyers. If one compares a sub-2 percent U.S. 10-year note yield with the nearly zero or even negative yields that are available from German and Japanese bonds, it should come as no surprise that Treasuries are still in demand. If you further add on the effects of a rising U.S. Dollar to the mix, it makes U.S. Government debt even more attractive compared to most of its non-U.S. alternatives.?
Fundamentals
?Do as I say not as I do?? This appears to be the takeaway by market participants following the March Federal Open Market Committee (FOMC) meeting with the Fed removing the key word ?patience? from the statement released following the meeting. While this was widely expected to be the case, Fed Chairwomen Janet Yellen threw traders a curve ball in the press conference following the meeting by stating ?Just because we removed the word ?patient? from the statement doesn?t mean that we are going to be impatient.? This phrase triggered a violent reaction by the market as it appeared to imply that the Fed would not begin to raise interest rates in the near future and, in fact, appears to be quite willing to wait until it sees clear signs that inflation is running near its target of 2% and the labor market is fully recovered and wage growth is improving. So while it does still appear that by removing the word ?patient? from the statement, the Fed does still plan to hike interest rates at some point this year however, the timing of the rate increase remains uncertain and may not occur until much later in the year than the previous market expectation of an increase at the June FOMC meeting. In the meantime, we may see an up-tick in market volatility, especially following the release of important economic data, as market participants try to anticipate if this will be the report that finally gets the Fed off the sidelines and moves to raise interest rate for the first time since June of 2006.
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for 10-year Note futures, we notice the price ?spike? on Wednesday following the rather ?dovish? Fed statement. However, we are starting to see some good resistance just above the 129-00 price level, as the market has tested this price level several times the past few weeks and has yet to move higher. However, prices remain above the 20 and 200-day moving averages and momentum is still positive with a current reading of 54.41. Resistance is seen at 129-03.5, with support found at 125-29.5.??
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