European bond yields continued to fall last week although the outlook for individual markets remains uncertain, says Chris Williams at Soc Gen. Some RSI readings, such as Germany 30 yr, suggest some yield charts may be oversold although the 10yr may be subject to more downside.
Spain, Italy and Portugal bond yields are too low and are poised to top, says Chris Williams at Societe Generale. The RSI for each market are showing extreme overbought conditions with significant trendlines also about to be tested.
Sentiment measured by the Commitment of Traders Report suggests that a major top (yield low) in the 10-Yr Treasury is not on the cards. says Mike Sacchitello at Stone & McCarthy. This is because there is no significant contrarian signal of an extreme in the large speculators less commercial hedgers.
The close correlation between the small cap/S&P ratio and 10-year US Treasuries suggests that the 10-year Treasury yield could fall below 2.40%, says Mike Sacchitello at Stone and McCarthy. This comes after last week’s decline in small caps stocks following fears of excessive valuations.
Andrew Gebhardt of Foxcurve discusses the outlook for euribor, eurodollar and short sterling 2015-17 futures contracts, including entry levels, targets and stop-loss levels.
US Treasury yields look set to rally going forward but German yields continue to struggle, says Chris Williams at Societe Generale. For the US 10-year, 2.69 needs to be breached for further gains but for the 10-yr Bund low volume and the failure of recent rallies means the all-time low of 1.12 may be tested.
The market remains bearish for 10-year gilts after reaching the target of 109.24, says Dmytro Bondar at RBS. However, as prices approach the lower Bollinger band, a bullish correction/consolidation should be expected but this will be followed by the return of downside pressure.
DeMark indicators suggest that the recent rally of the GBP 2-year swap rate is likely to exhaust in the short-term, according to Tim McCullough at Lloyds Bank. The rally from 0.55% in April last year should re-test 1.17% completing a TD Sequential 13 pattern. Targets after that are 0.71%-0.99%.
Eurodollar futures still have upside potential to go says Michael Sacchitello at Stone & McCarthy. Last week, The COT report showed large speculator net short bets on 3-month Eurodollar futures at a record 1.56 million contracts, however, potential upside remains from a technical perspective.
The 10-year Treasury yield has found support at 2.5231 and is set to rise further in the months ahead according to analysts at 4Cast. This level is the October 2013 low and consolidation since then should lead to further gains beyond 3% around Q3 of this year.