Bloomberg News

Bond Momentum May Push Yields Down: Technical Analysis

May 29, 2012

Price momentum indicates Treasury 30- year bonds, which have produced almost double the returns of the broader Treasury market this year, are poised to rally, according to CRT Capital Group LLC, citing technical analysis.

Weekly Stochastics, used to predict a security’s movement based on how close its price is to its highest or lowest levels, are signaling the 30-year bond rally has further to run, even as the securities have reached “equilibrium,” said David Ader, head of U.S. government-bond strategy at CRT in Stamford, Connecticut

The 30-year yield failed to breach its yearly closing low of 2.78 percent after approaching that level during the past six sessions. A breach of 2.78 percent would signal further rallying to as low as 2.72 percent, Ader said.

“Domestic data has shifted and, of greater importance, Europe is and remains an uncertain mess,” Ader said in a telephone interview. “A break of 2.78 percent will signal movement away from the equilibrium in the market, and short-term bullish momentum. And in this environment, you take your few basis points and you say ‘thank you.’”

The 30-year yield was little changed at 2.84 percent in New York, according to Bloomberg Bond Trader prices.

Thirty-year bonds have returned 2.3 percent this year, outperforming the 1.2 percent gain in the broader Treasury market, according to Bank of America Merrill Lynch indexes.

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

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: David Liedtka at dliedtka@bloomberg.net


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