U.S. Treasuries: Start Of A Bearish Trend Or Bull Flag?
Today’s Spotlight Market
Bond traders have several economic reports on their calendar that could help shed light on the strength of U.S. growth.? Thursday, we start the morning with initial jobless claims; analysts expect a slight rise to 285,000 new claims vs. 278,000 reported last week. Also on Thursday, the market will get the results of retail sales for January.
Fundamentals
The historic bull market for U.S. Treasury Bonds, which can arguably trace its beginnings back to 1981, has once again run into some headwinds following a much better than anticipated non-farm payrolls report for January, as well as some headway into dealing with the Greece debt crisis. The biggest catalyst for the recent weakness in Treasuries was the strong January payroll figures which seem to show the U.S. labor market continues to strengthen.
Market participants greeted the jobs data by selling U.S. debt instruments, with Fed Fund futures pricing in an increased chance that the Federal Reserve will finally begin raising short-term interest rates by mid-year.? In addition, bond traders are focusing on this week?s Treasury auctions which include the sale of $24 billion of 10-year Notes, as well as $16 billion of 30-year Bonds. With rates starting to tick up from recent lows, the market will be particularly focused on the participation of foreign buyers who might be tempted to by 10-year rates hovering near 2%.?
While on the surface this does not sound like much return for a 10-year time frame, we should remember that we must compare this yield to what is available outside the U.S. and especially Europe, where the 10-year bond yields for countries such as Spain and Italy do not approach that of the U.S. It is this comparison of U.S. rates compared to that of the rest of the world where the U.S. government debt market still looks attractive and may be the ultimate reason why the Bond ?bull? may still have some legs left.
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for Treasury Bond futures, if we start at the most recent major low which was made during the final days of 2013 and draw a trend line connecting the next significant low made back in September 2014, we notice Bond prices still trading over 6 points above the this trend line, which would need to be tested before we could really put credence in calling an end to the bull market. The near-term trend is in the bear camp as prices have fallen below the 20-day moving average. The 14-day RSI has moved from overbought levels to a more neutral reading of 45.90. 145-13 appears to be the next support point for the lead-month March contract, with resistance seen at 149-15.?
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