Ten-Year Note Yields Approach 4.50%!
Prices on U.S. Ten-year Notes continue to rise as cash Ten-year Note yields hover near 6-month lows. The low yields are the effect of traders’ beliefs that the Federal Reserve will cut interest rates, with the market pricing in a 75 basis point cut in the Fed Funds rate by March of 2008. Financial traders will be watching today’s release of the Institute for Supply Management (ISM) factory index. Economists expect U.S. manufacturing growth to have slowed last month, with an average estimate of 53 for the factory index versus 53.8 the previous month. Analysts will be closely watching this month’s round of economic reports, as most will include the period when the subprime fallout directly affected the markets. Should the data prove to be weaker than expected, it could be the catalyst for the Fed to finally cut rates and support the bull trend in the Treasury markets.
Looking at the daily chart for December Ten-year Note futures, we notice prices hovering near the recent highs of 109-150. Currently yielding 4.52%, cash yields are approaching psychological resistance at 4.50%. Momentum as measured by the 14-day RSI looks strong, but is approaching overbought levels with a reading of 67.33. The recent highs of 109-150 should act as resistance for the December contract, with support found at the 20-day moving average currently at 108-080. In early trade, December Ten-year Note futures were trading at 109-100, up 0-085.
