Yields Rise Close to 2.9 Percent on Taper Worries

by on December 6, 2013 5:32 am BST

US treasuries fall as volatility increased to the highest level since October ahead of the vastly important unemployment rate and non-farm payrolls data, and worries about shrinking liquidity is flowing through all asset classes.

The 10Y treasury note almost hit a three-month high after the positive data out in the last couple days. Unemployment claims came in at 298K, dropping below 300K. According to tradingeconomics.com, this marks only the second time since January 2010. The  surprises in the US data continued as the world’s largest economy grew 3.6 percent in the third quarter, largely on inventories.

Initial Jobless Claims 2010-Current

Initial Jobless Claims 2010-Current

“We’ve seen lots of good jobs numbers in the U.S. economy,” said Kazuaki Oh’e, a debt salesman at CIBC World Markets. It is only a matter of time that the Federal Reserve tapers, and data remains positive through the next couple months.

The 10Y treasury note hit 2.88 yesterday as it inches up to three percent. Oh’e said that the 10Y will likely reach three percent in the first quarter of 2014, which is more than likely.

Technically, the 10Y treasury note futures broke through a large triangle and began trading downward rather quickly. The 10Y note gained 12 bps this week, the largest gain since the week of November 8. Yesterday’s price action closed below price action resistance, and futures currently linger underneath the new resistance.

Positive data tomorrow will push the 10Y yield higher as prices selloff further. The most probable target is located at 123’175, while a pullback to 125’035 is possible give the new resistance is broken.

The ADX remains strong at 26, but the -DMI is ticking downward. 10Y futures are likely to remain quiet until European traders begin to position themselves for tomorrow’s data.

1D Chart of ZN

1D Chart of ZN