US TREASURIES GAIN AS BARGAIN HUNTERS TAKE ADVANTAGE OF HIGHER YIELDS, TECHNICAL RESISTANCE TRIIGGERS INTEREST IN BUYING AS RISK TOLERENCE HEADS OUT FOR SUMMER VACATION.

US TREASURIES gained on speculation that recent sell offs in US government securities may be reaching oversold technical points, creating purchasing interest at 2009 yield highs, particularly in the long end of the curve which has steepened to a point where the price of US 10 year futures has surpassed the US 30 years. Additional support for Treasuries appeared after comments from Paul Volker suggested that true economic recovery “the next hot thing” is years away. Supply concerns and economic uncertainty continue to act as opposing forces on the price and yields of US government securities.

The mitigating force upon Treasuries downward momentum should likely be the desire for traders and investors to price in a summer rest. This should reintroduce a modest version of the flight to security sentiment as support levels increase in frequency, creating a narrowing range channel for Treasuries to trade within during the summer. A number of markets appear to be reaching their technical limits, so range trading across a number of commodity markets is likely to ensue.

Technically, September 30 years bonds is setting up to range trade, with the market setting up an upward resistance target of 116-120. Market should be implementing a series of lower highs for the near term. Support for the market sets in initially at 114-250, with a break of 114-030 implementing a renewal of strong downward momentum to the 112-050 level.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US U9 (US 30 YRS)

115-000

115-180

114-140

115-110

+25.0/32nds

TY U9 (US 10 YRS)

115-210

115-315

115-065

115-190

+5.5/32nds