Wednesday, June 1, 2016
Ten Year Treasury – Failed Bullish Break(s)
TYU6 is falling back from a second foray above 129-26+ this morning. Of course, TYU6 formed resistance at this level with three day-session highs at 129-26+ since May 23. The break above that level this morning may have prompted some short covering and/or bullish long position initiation. An inability to maintain price action above that level should be expected to drive price action closer to the 129-17+ 5:00 pm opening level.
We would not materially change our near-term view based on failure to maintain the advance above 129-26+ today. Additional movement above that level today, should it happen on the back of additional news such as weaker car sales or an unexpected Fed quote would not be expected to move above resistance toward 130-00 / -04.
On the May 18th session when the Fed released the Minutes of the April FOMC meeting, TYU6 fell by more than it had since becoming more actively traded in mid-March. That session should be considered directionally telling because of that outsized decline. Additionally, it is offered greater significance still because of the inability for the bullish contingent to make any significant head roads against this decline in the subsequent sessions. It took six sessions before even half of the single session decline of May 18th was recovered in a settlement.
The above continues to give rise to bearish sentiment. For now, price action has largely been confined within a modest range near the lower portion of trade from May 18th. It is possible that the anecdotal information provided by the Beige Book for the June FOMC meeting, released later today, will provide impetus for a move outside the 129-06 to 129-30 range. For now, it would appear that a break below this range would offer a greater chance for an outsized move than was the break above 129-26+ earlier.