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Fixed Income Update: More Supply

Submitted by Tyler Durden on 10/26/2009 09:13 -0400

Submitted by Nic Lenoir of ICAP

We have a lot of fresh Treasury supply coming in this week. The last 30-Y auction put an end to a series off auctions that were coming in better than expected. However, as we had warned before that last long bond auction, the expected yield below 4% had the potential to trigger some retaliation by real money investors. Sure enoguh the scenario played out and since then yield have backed up towards 4.30%. Also as pointed out last week 3.50% on the 10Y is a relatively key psychological level.

On the 30-minute chart we see there is a fair bit of divergence, and we we have a clear reistance trend we are flirting with this morning, the lower part of the range 117-10/13 should be bought here in short term trading to play a retracement towards 118-13. Only a break there would potentially invalidate the downtrend we have been in.