Tuesday October 26, 2010 - 22:38:30 GMT
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U.S. Debt Markets Feel Pressure after Home Price Report
December Treasury Bonds and Treasury Notes
are trading lower after breaking technical support following the release of a
better-than-expected economic report. T
Investors are driving up yields after it
was reported that the S&P/Case-Shiller Index on home prices in 20 major
cities rose 1.7% in August from a year ago. This caught the long side of the
market by surprise, sending yields higher and Treasury instruments lower.
Treasury Notes appear to be the weakest
after breaking previous swing bottom support at 126â€™02, indicating the
possibility of further downside action. Treasury Bonds stopped one tick above
the previous bottom at 130â€™25. Although
this report is bearish, it is not expected to crush the debt instruments. Many
of the bigger traders are on the sidelines ahead of next weekâ€™s Fed monetary
policy announcement on November 3.
The December British Pound is up nearly 1%
at the mid-session after a stronger-than-expected economic report signaled
growth. This news reduced the prospects for further easing by the Bank of
England, therefore, driving up the value of the Sterling.
For a couple of weeks, the Cable has been
under pressure on speculation that the BoE would be forced to implement a new
round of quantitative easing due to new tax increases and fresh spending cuts.
The BoE has been hinting that additional
asset purchases would be necessary to prevent the economy from derailing,
sending it into a possible double-dip recession.
The initial boost for the British Pound
came after it was reported that the U.K.â€™s third-quarter gross domestic
product grew 0.8% versus the previous quarter. An additional surge in the Sterling was attributed to the S&P Corpâ€™s revised
credit outlook for the U.K.
The credit reporting agency changed its outlook from negative to stable, citing
the governmentâ€™s willingness to cut spending as the main reason for the change.
Technically, the Pound completed a 50%
correction of the break from 1.6106 to 1.5650. This price is 1.5878. Further
upside action could drive the Pound into the Fib retracement level at 1.5931.
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