Bloomberg News

Treasury 10-Year Rally Faces Bar at 1.84%: Technical Analysis

January 04, 2012

Jan. 4 (Bloomberg) -- U.S. 10-year yields may struggle to push below 1.84 percent after they approached the least on record at the end of last year, Daiwa Asset Management Co. said, citing trading patterns.

A Fibonacci graph shows that level is a 76.4 percent retracement of the increase in yields from the record low of 1.67 percent set Sept. 23 to 2.42 percent reached on Oct. 28. Rates slid below the barrier in December but failed to stay there.

Ten-year Treasury yields were little changed today at 1.95 percent as of 7:11 a.m. in London, according to Bloomberg Bond Trader prices. The 2 percent security due in November 2021 changed hands at 100 15/32.

“If the 10-year yield goes below 1.84 percent, the trend is still down,” said Tsutomu Komiya, a bond investor in Tokyo at Daiwa Asset Management Co., which oversees the equivalent of $120.7 billion and is a unit of Japan’s second-biggest brokerage.

Demand for safety as European officials try to control spending and support their economies has sent Treasuries surging. U.S. government securities due in 10 years and more rallied 29 percent last year, the most among 144 bond indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies after accounting for currency changes.

Fibonacci analysis is based on a series of numbers developed by Leonardo da Pisa, a mathematician in the Middle Ages known as Fibonacci, who was studying growth rates. Analysts use the numbers to determine levels where buy and sell orders may be set.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

--Editors: Jonathan Annells, Benjamin Purvis

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net.


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