Thursday, March 15, 2012

30-Year U.S. Treasury Bond Got Killed This Week ($USB)

30y Treasury Bond Price (stockcharts.com)
After the Fed's FOMC statement was released, which said it plans to keep rates at 0-0.25% through late 2014, continue its "operation twist" policy with maturing Treasury securities, and reinvest agency debt into MBS, 30-year Treasury bonds got smoked (or it was related to something else). Check out the chart of the 30-year Treasury bond price ($USB). It broke through floor support and then pierced through the 200 day moving average, closing at 136.62. Other levels to watch are 136.44 (the August 2010 peak) and 134.85 (the October 2011 low). The relative strength index (RSI) looks weak, and the MACD is below zero and trending down. Something to watch going forward. Have the bond vigilantes finally arrived?

Fiscal policy news:
U.S. Budget Deficit Revised Upward to $1.2 Trillion for 2012 (Bloomberg, 3/13/2012)

Related posts on on bond vigilantes:
David Stockman: Vicious Sell-Off In Bond Market Could Force Action on Budget Deficit, Debt (5/25/2011)
Niall Ferguson: Treasury Bond Vigilantes Coming, Default Or Inflation Choice For US (7/7/2010)

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