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The Monthly Banker: 11 July 2014

Aussie 10-yr Yield extends downtrend


Aussie 10-yr Yield extends downtrend


The small bounce from the late-June low, at 3.521%, by theAustralian 10-year Bond Yieldpetered out quite quickly, with resistance arriving early this month at 3.612%.  This is close to the sideways region running across the page near 3.6%.  Although the RSI is now oversold, a sustained crossing of that level would be required to delay an extension of the downtrend from the November 2013 peak towards the spring floor of that year at 3.008%, though there are a couple of minor support levels before that platform; at 3.23% (7 June 2013 low) and 3.154% (17 May 2013 low).



Weekly Comment:


Government Bond Futures 


US - So far this month, the 2-year Treasury Note future has reacted to the mid-June low, near 109.60.  That prior support produced a good, quick rebound taking prices back to the mid-May/early-June peak area.  Given the strength of this week's rally, one would expect momentum to carry valuations higher within that pattern, which stretches up to 109.938.


UK - The Gilt future has successfully challenged support at the June floor at 108.62.  The 200-day moving average also appeared to play a role in lifting prices.  Some intraday resistance ('thin upper tail' on the last candle) is noted at the May ceiling.  However, a breach of last month's support would be needed to reaffirm that barrier, at 111.14. 


Europe - Having encountered support near former resistance from the May/mid-June highs, near 146, early this month, the Euro 10-yr Bund has rallied to a new contract high.  Clearly uptrend support is at the 50-day MA, and a breach would be required to damage the pattern.


Asia - Following a short-lived and shallow correction from the late-June overbought high, Japanese Government Bond futures resumed the advance to new highs.  The RSI is back in overbought ground, though a sustained fall beneath the 50-day MA would be necessary to spook bulls.


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