Long Bond Yield May Head Even Lower


By Bondsquawk

July 16, 2012

Even with the massive rally in the Treasury market and lows approaching low nominal levels, rates could go even lower according to some of the pros. In particular, RBC’s Rates and Research team, led by Michel Cloherty, suggested in their July 12, 2012 U.S. Interest Rates Focus report that the yield on the widely followed Long Bond has the potential to go even lower, even from today’s mark of 2.57%.

Long bond yields have pushed lower over the past few sessions, breaking below a shorter-term support level at 2.65 in the process (see Exhibit 3).

Despite the near record low level of yields across the curve, yesterday’s 10-year auction garnered a stellar result, and this may increase volatility around today’s long bond auction.

The intraday yield low from yesterday at 2.56 will be the key downside level to watch through today’s supply, as a break below this point on a strong auction result would pave the way for a test of the record low in yield from June 1 at 2.51, followed by 2.45.



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