Bond Technical Strategy – Weekly by Lloyds TSB

In the last release it was noted that the short end of the curve had not reacted in line with the commodity market moves and as the prospects for a correction/ consolidation in these assets becomes more compelling, this could force short term yields even lower
across core bonds markets.

In the last release it was noted that the short end of the curve had not reacted in line with the commodity market moves and as the prospects for a correction/ consolidation in these assets becomes more compelling, this could force short term yields even lower
across core bonds markets.

This scenario implies a new high break-out for two year US notes as the market hovers near key technical resistance. As the market gets drawn to the main buy signal over 109.00, the risk for a trending signal increases.

In the last release I highlighted the developing risk for a push higher in short sterling and the break-out pattern is similar to the current two US 2 year bond set up. This could encourage a price rebound in the long end and hence flatten the curve in the short term.

However, the expectation of continued strength in commodities, despite any interim corrections, will limit the impact.

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