Treasury supply increased in May, but not enough to knock the markets down. The massive money printing campaigns of the BoJ and ECB along with their negative interest rates drives capital to US markets, tilting the playing field against the bears.
The 10 year Treasury yield has rebounded to the top of its intermediate term trading range, while the US dollar has been in a test of major support. Here’s where the charts are pointing.
Except for a brief interlude at the end of this month, in terms of Treasury supply, the deck still looks stacked against the bears at least through June. However, Foreign Central Banks are turning negative again.
The deck looks stacked against the bears at least through June. Here are the particulars on why, and what to expect.
The 10 year Treasury yield has formed a double bottom in an attempt to end the downtrend, while the US dollar continues to weaken toward a test of major support.
The massive flow of tax collections causes the Treasury to pay down debt from now to mid May, putting cash back into the accounts of dealers and investors. At the same time, the Fed will be settling MBS purchases in mid month as usual. That can be an incendiary combo.
Total demand for long term Treasuries at the March auctions dropped, continuing the downtrend of the past 6 ½ years. But supply, which has also been falling over that period, has stabilized and could turn higher.
Last week the Treasury cut back the supply of the 4 week bills to $55 billion from $60 billion. Today they just announced another cut, to $45 billion. As a result of continuing massive demand for short government paper, the 4 week bill rate broke down from its range and closed at 18 basis points…
The 10 year Treasury yield has pulled back from trend resistance, while the US dollar had a slight bounce from projected cycle channel support lines. Here’s what those moves mean.