US TNote Future – March 2010

Nicole Elliott from Mizuho Corporate Bank at 01/05/10

Comment: The US yield curve was at its steepest ever (twos-tens a record 285 and even steeper than the early 1990’s) in thin year-end conditions, then last week short-dates were hard hit, benchmark two-year yields doubling from 0.60% to 1.20%. This futures contract became more oversold than it has been since June so we expect it to recover this month towards 118.00. Further out it is Technically important that benchmark ten-year yields top around (and preferably just under) 4.00% as a monthly close above 4.10% would signal that the ultra-long term trend to lower yields might be over. In which case a massive back-up would be the next most likely step.

Strategy: Buy at 115.24; stop below 114.28. Add to longs on a daily close above 116.00 and again above 117.00 for 118.00 and maybe more.