Morning Futures Roundup

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European Debt Woes, Renews Life for Long-Term Bond Bulls

   Fundamentals
U.S. Treasury Bond futures have seen renewed buying interest during the past two trading sessions, as traders' concerns turned back to Europe, with Spanish bond yields at their highest levels in over 3 months. A poorly received auction of Spanish bonds triggered a move towards "risk-off" investments such as The U.S. Dollar and Treasury Bonds. Spanish 10-year bond yields now stand at 5.8%, which is the highest level since December and the highest level since the ECB began its long-term refinancing operations to help quell rising yields of struggling European nations.

The rise in long-term U.S. Bond prices comes despite an apparent shift in the Federal Reserve away from further easing measures, allowing analysts to lower the odds of another round of quantitative easing (QE3) to below 50%. After trading in a relatively narrow 6-point price range for the past six months, bond prices fell below support near the 140-00 price level in mid-March, as better employment data and continued signs of an improving economic outlook in the U.S. sent stock prices higher and took some of the "safe haven" luster from the Treasury market. However, renewed concerns about Europe and signs of slowing growth in China appear to be enticing traders back into U.S. Treasures.

Now the question remains whether Bond prices have put in a near-term bottom near the 135-00 level and are poised to move back into the 140 to 146 trading range, or if the recent rally is nothing more than a short-covering bounce in what could be the start of a potentially significant price decline and end to the historic Bond bull market that began over 30 years ago!

   Technical Notes
Looking at the daily continuation chart for Treasury Bond futures, we notice prices holding just below the lower level of the previous consolidation pattern. The 20 and 200-day moving averages are holding near each other, which may be a sign that a new consolidation pattern, though at a lower level, may be forming. There is what appears to be a possible double-bottom formation starting at the October 28th low of 135-05, which was tested again on March 19th. The 14-day RSI has moved from oversold levels to a more neutral reading of 46.94. Support is seen at 135-05, with resistance found at the recent high made on March 30th at 139-05.


  
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