US TNote Future – March 2010

Nicole Elliott from Mizuho Corporate Bank at 02/16/10

Comment: The US yield curve is still terribly steep, two’s/ten’s TNotes a record 288 basis points. Last week’s pullback in futures prices has been deeper than we had allowed for and a pity because we are back below the 118.00 area, one standard deviation from the mean since September. Bullish momentum has eased very considerably and other technicals are dreary. Hopefully prices will stabilise and regroup, preparing to move higher through a series of obstacles on the way up to contract high at 120.15 to 122.00.

Strategy: Attempt longs at 117.28; stop well below 117.00. Add to longs on a weekly close above 118.08 and on a daily and close above 119.00 for 120.00/120.15 where signs of instability might emerge. A weekly close above here is the minimum needed to signal a change in gear and another rush towards the all-time high at 130.25.