BofA Merrill Lynch notes ..... We are bullish US Treasuries from 5yrs and out, with evidence saying that the back end of the curve should lead the way lower (in yield). While we target the Jan-30 lows of 1.150% (5s), 1.6…
We are bullish US Treasuries from 5yrs and out, with evidence saying that the back end of the curve should lead the way lower (in yield). While we target the Jan-30 lows of 1.150% (5s), 1.636% (10s) and 2.218% (30s), a look at the long term chart in 30s says that we should ultimately push significantly lower.
As such, we maintain our 5s30s flattener for 88bps and below. Back above 114bps would indicate a greater range trade than expected. Turing to the short term view for 30s, we are completing a 5-wave decline from the 2.870% Mar-06 high. Using the Elliott Wave principle as our guide, 5-wave moves are followed by 3-wave corrective moves.
In the next several sessions, we look for a corrective yield bounce, back toward 2.560%/2.633%. We would look to buy that yield bounce (price dip) for a push to the Jan lows, at 2.218% and below.
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