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Quick Word On 10 Year Yields
Submitted by Nic Lenoir of ICAP
10Y yields are challenging an important resistance this morning just below 3.50. We expected to drop to 117-24/28 overnight, but it seems the Financial Times article about a change in language by the fed put pressure on markets overnight. I personally feel that the article was more one person's wishful opinion more than anything else. If those words came out of the mouth of a Fed official it would be a different story. However the preson putting the story out is one of the best informed financial journalist when it comes to the Fed. Most people agree that this is a theme for early 2010, so maybe it's a way for the author to position first on the story and have a right to claim when it happens. Certainly a change of language is something easier to do for officials considering the mess that resulted from the reverse repo dry run. According to Lou Crandall, our chief economist, this is a topic for early 2010, but he thinks that a change in language could well be the first action by the Fed in the process of moving towards normalizing rates.
Technically we were hoping another bounce before breaking. As can be seen on the 30 minute chart indicators are pretty oversold, a retracement towards 117-24/118 on the day seems very likely, and we would argue for the possibility to see 118-08 before really moving higher in yields. In terms of price action it just happens that we pushed a little too low right off the bat without consolidating enough on the short-term indicators to have enough strength to keep carrying this move. We also think that stocks should they test 1,098/1,004.3 are likely to experience another quck and sharp sell-off which will probably put a bid at least temporarily on treasuries.
Good luck trading,
Nic
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Looks like a massive key reversal on cable today. USDZAR still looks like it's bristling with intent on the upside too.
Yeah!
So.... what exactly was the FT article about, Nic?
link for FT article ? would be appreciated.
I'd just like a quick synopsis, since the FT article likely requires subsription.
I can only guess that the Fed may get more hawkish in language since the reverso repo stuff was a joke. But I'm just guessing at this point...
If you google the headline, you can read it for free, just like the WSJ - although more often than not it's not worth it.
Here we have equities being walked down (again) today to confuse market participants - who still believe in the soon-to-be-blown-to-smithereens bonds-stocks yo-yo ala Nic over here - into supporting the tottering Treasuries market.
What other way is available to support
them? If the casino pays so much better, they
won't get bought.
Ooooooo...the fed changed it's "language". I bet that means severe implications on the future of mankind on planet Earth.
How great is this?! We have someone with a direct line to God Himself!!!
Gordon, remember: greed is good...
Here's the FT link:
http://www.ft.com/cms/s/0/6d32c768-bf54-11de-a696-00144feab49a.html?ncli...
FYI--The possible language change has to do with keeping interest rate low "for a long time" vs. the current "extended period."
Apparently, the former is not as long as the latter.
Lilguy
Nic is good, not greed. His charts have helped me unearth some things & I appreciate his posts here. Keep 'em coming.
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