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| Fixed Income Daily Hotline 24 August 2010 By J Wong, Analyst |
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The UK 10-year bond yield has been grinding lower since March 2010. From 4.2%, the yield shed a chunky 120bps in six months - one of the the largest falls in years.
Despite this oversold decline, the trend is not yet over.
A quick look at the historical charts shows the weight of the trend remains squarely on the downside. The entrenched pattern of lower lows and lower highs tell us that the 2008 lows are not sturdy enough to stem the tide and reverse the long-term downtrend.
Having breached 3% lately, expect another 20-50bps fall.
The Canadian 10-year bond yield also breached the 3% level recently, falling towards its lowest level since early 2009 (see right).
Like the UK, the long-term trend here dictates that the new lows are in the offing, possibly even breaking the 2008 secular lows.
However, expect some support to emerge around that region.
Turning to Japan, the 5-year bond yield is now within striking distance to the 2003 low. That nadir was the lowest level in decades. Therefore, a fall below that level would be ultra-bullish on 5-year Japanese bonds.
Whether a rebound will occur at that low is difficult to say now because the Japanese authorities have no concrete idea on how to deal with the deflationary pressure in the country. The recent meeting between the BoJ and the Prime Minister yielded no good plan to revive the economy. Ergo, the Yen rocketed to new 15-year highs against major currencies today, accentuating deflationary fears in the country.
P&F Breakouts: Aug 23, 2010.
Symbol
Name
Signal
Signal
PricePrice
ObjectiveStoploss
Latest
CloseSIGB3.75
Singapore 10yr Govt Bond (Domestic) 3.75% 09/2016
Bull 116.00 3250.00 15.00 114.5
P&F breakouts identify medium-term trend changes. "Bull" breakouts occur when a stock reverses its downtrend by posting a "higher high". "Bear" breakouts are the inverse.
Key Day Reversals : August 24, 2010None found
Key day reversals are technical signals formed by stocks posting an "outside day" of a higher high and a lower close. Sells/Peaks occur on countertrend reversals from a bullish trend and buys/Troughs occur on countertrend reversals from bearish trends. Signals are particularly powerful when occurring after a period of overextension.
MA Crossovers : August 24, 2010
None found
Moving Average (MA) crossovers identify longer-term changes of trend. We scan for "Golden" (bullish) and "Dead" (bearish) signals occurring when an instrument’s 50-day MA crosses its 200-day MA.
| Date | Stock | Code | Type | Open Price | Current Price | % P&L | Stop | Comment |
| 11 Feb 2010 | Thailand CDS USD SR 5Y Curncy | THAI | Long | 116.71 | 117.573 | +0.74% | ||
| 3 May 2010 | People's Republic of China 5yr CDS | CCHIN1U5 | Long | 70.1716 | 81.7071 | +16.44% | ||
| 8 Jul 2010 | iShares iBoxx High Yield Corporate Bond Fund | HYG | Long | 86.6 | 87.73 | +1.30% | 84 | |
| 13 Jul 2010 | 10-year JGB (Sep 10) | JBU0 | Short | 141.4 | 142.83 | -1.01% | 143 | |
| 27 Jul 2010 | Euro 5yr Bobl (Sep 10) | OEU0 | Short | 119.54 | 122.07 | -2.12% | 122 |
| Symbol | Name | Comment | Close | 1 day | Support | Resistance |
| EDU0 | Eurodollar (Sept) | Holds the uptrend, but increasingly shaky. | 99.6875 | +0.0% | 99.55/99.30 | 99.62 |
| TUU0 | US 2yr T-Notes (Sep 10) | Upside renewal. But finds resistance at 109.7. | 109.695 | +0.0% | 109.30 | 109.7 |
| FVU0 | US 5yr T-Notes (Sep 10) | Holds uptrend. | 120.578 | +0.1% | 119.50 | / |
| TYU0 | US 10yr T-Notes (Sep 10) | Modest uptrend acceleration. | 125.656 | +0.1% | 123.50 | / |
| USU0 | US 30yr T-Bond (Sep 10) | Holds upside breakout. Trend acceleration. | 134.125 | +0.1% | 126 | 129.50 |
| USSS10 | USD 10yr Swap Spread | Downtrend rebound. | 1.75 | -30.0% | -5 | 14 |
| CNU0 | Canadian 10-year (Sep 10) | Upside breakout countered. | 126.31 | +0.3% | 120 | 122 |
| ERU0 | Euribor 3m (Sep 10) | Potential top formation over the March-Aug period. | 99.125 | 0.00% | 98.90 | 99.07 |
| DUU0 | Euro 2yr Schatz (Sep 10) | Approaching prior peaks. | 109.75 | -0.0% | 108.516 | 108.6 |
| OEU0 | Euro 5yr Bobl (Sep 10) | Rallies into m-t highs, but starts to wobble. | 122.07 | -0.0% | 119.8 | 121 |
| RXU0 | Euro 10yr Bund (Sep 10) | Rallies into m-t highs but starts to hesitates. | 132.76 | -0.1% | 127.6 | 130 |
| UBU0 | Euro 30-year Buxl (Sep 10) | Upside renewal selling off. | 119.26 | -0.2% | 109 | 113? |
| L U0 | Short Sterling (Sep 10) | Holds uptrend, but beneath 99.3. | 99.27 | -0.0% | 99 | 99.25 |
| G U0 | Long Gilt Future Sep10 | Uptrend encounters modest selling. | 125.15 | +0.0% | 120 | ? |
| JBU0 | 10-year JGB (Sep 10) | Uptrend produces tail. A correction looms? | 142.83 | -0.0% | 141 | 143 |
| YMU0 | Australian 3-year Govt Future (Sep 10) | Sideways consolidation beneath the June peak. | 95.5 | -0.0% | 95 | 95.50 |
| XMU0 | Australian 10-year Govt Futures (Sep 10) | Rallies above the resistance. | 95.07 | -0.0% | 94.5 | 94.7 |
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