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6 Jan 2015
Treasuries overbought, but bulls still in control – RBS
FXStreet (Barcelona) - William O’Donnell, Head of US Treasury Strategy at RBS, notes that US treasuries are still overbought but there are not signs yet that the bulls/buyers have lost control of the price action.
Key Quotes
“I still have high confidence that market technicals (long-term momentum work, positioning and sentiment data, etc) will eventually sniff out the beginnings of new bear trends in rates markets, even if the economic data has done a lousy job at it in the past year.”
“Long term momentum work in Treasury 10's and 30's is into 'overbought' territory but there are no signs yet that the bulls/buyers have lost control of the price action. We've seen ~104 straight days where national gas prices have fallen; a good lesson that trends can persist longer than trend-fighters can remain solvent.”
“Anyway, it's clear that the brushfires that have pushed safe haven rates lower around the globe still have dry tinder to burn.”
“Indeed, the just updated CFTC data showed that Specs and Levered $ are near an all-time record short in TU out to WN futures. Specs had a record net short in TY futures of $26bn in TY futures equivalents in the latest numbers.”
“This is why I've said in recent weeks that it's too early to sell or go short, even if it may be too late to buy the overbought back-end of the US rates curve.”
“10s (1.99%)–Next major resistance comes in at the flash crash lows ~1.86%. There is some minor resistance at ~2.10% before that. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is solidly bullish.”
“30s (2.56%)– Bonds don't have any solid support until 3.105%, the November "lows." Next resistance is a huge level at ~2.50%, the all-time rate lows for bonds. Daily momentum is bullish but edging into overbought readings.”
Key Quotes
“I still have high confidence that market technicals (long-term momentum work, positioning and sentiment data, etc) will eventually sniff out the beginnings of new bear trends in rates markets, even if the economic data has done a lousy job at it in the past year.”
“Long term momentum work in Treasury 10's and 30's is into 'overbought' territory but there are no signs yet that the bulls/buyers have lost control of the price action. We've seen ~104 straight days where national gas prices have fallen; a good lesson that trends can persist longer than trend-fighters can remain solvent.”
“Anyway, it's clear that the brushfires that have pushed safe haven rates lower around the globe still have dry tinder to burn.”
“Indeed, the just updated CFTC data showed that Specs and Levered $ are near an all-time record short in TU out to WN futures. Specs had a record net short in TY futures of $26bn in TY futures equivalents in the latest numbers.”
“This is why I've said in recent weeks that it's too early to sell or go short, even if it may be too late to buy the overbought back-end of the US rates curve.”
“10s (1.99%)–Next major resistance comes in at the flash crash lows ~1.86%. There is some minor resistance at ~2.10% before that. Next support comes in ~2.40% with major support at 2.66% after that. Daily momentum is solidly bullish.”
“30s (2.56%)– Bonds don't have any solid support until 3.105%, the November "lows." Next resistance is a huge level at ~2.50%, the all-time rate lows for bonds. Daily momentum is bullish but edging into overbought readings.”