From the September 01, 2011 issue of Futures Magazine • Subscribe!

10-year Treasury note reaching higher

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Futures on the U.S. 10-year note moved sharply higher after Standard & Poor’s downgraded the U.S.’s long-term credit rating to AA+ in early August. Since then, ongoing uncertainty in other parts of the world has helped keep prices at elevated levels.

Andrew Wilkinson, senior market analyst at Interactive Brokers LLC, says woes in the global economy are propelling prices higher. “Sadly, there’s a laundry-list of economic woes that have pushed government bond yields to record lows. Unfortunately, it’s a symptom of the perceived mess that the global economy currently is saddled with,” he says. Wilkinson says employment gains will be a good measure of the economy going forward. If tepid employment gains continue, then he expects the 10-year note to be well supported. He sees support at 125 on the front contract and resistance at 131-20.

Jack Broz, founder of TradeBondFutures.com, says the downgrade itself did not cause a big move, but rather the note’s status as a safe haven against the problems happening elsewhere, particularly in Europe, has pushed prices. “The U.S. bond market still is the safe haven, still is the best paper in town, especially compared to Europe. That’s what helped push this market higher. With all the uncertainty going on, that’s why it’s made this move up,” he says.” Broz goes on to say that traders need to watch anything that may come out of the Federal Reserve’s annual Jackson Hole, Wyo. meeting. He pegs support at 128-15 and says the market is reaching for 133-06.

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