The price of 30-year bonds has recently exceeded the 4-month high and is currently trading around 135.
The current rally seen in the market of Treasuries is mainly connected with a decline in the US rate of unemployment. This is what the experts of Masterforex-V Academy think on the matter.
Despite the fact that the September data on the US employment rate in the Non-Farm sector were disappointing because of showing worse-than expected growth, the US rate of unemployment declined from 7.3% to 7.2% in September. This led to the belief that such weak performance in the US labor market is likely to make the Fed abstain from tapering the QE program in the near future. At the same time, the unemployment figures are gradually declining, which is exactly what the Fed needs.
Other bullish drivers in the market of US Treasuries include:
The amount of people employed in the Non-Farm sector increased by 144 000 in September. Still, the forecast was around 180K. The August report was revised to show 193 000, which is 24K above the preliminary figures. Still, the revised figures are viewed as disappointing as they are still below the target of 200K.
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The initial jobless claims figures are below the previous data (350K vs 358K a month before) but higher than expected (340K) and below the 4-week average.
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The mortgage rates declined again after a slight increase. This is definitely a bullish factor supporting the Treasuries market.
There are fears that China may tighten its monetary and credit policies. These fears also made some investors sell stocks and invest cash in safe-haven Treasuries. The benchmark interest rate in the Chinese banking sector is up by 0.4%. This is the biggest daily gain since July 2013.
At the same time, the strategists working for Societe Generale’s London office report that the People’s Bank of China has already withdrawn some 44.5bn Renminbi from China’s financial system. Along with the interest rate hike, this factor gave birth to the mentioned fears.
At the same time, there are several factors that will restrain and slow down the rally in the market of US Treasuries. In particular, the Eurozone’s PMI is 53,1 against the forecast of 51,4. Still, it is above September’s 51,1%.
Trading Recommendations
In terms of option trading, Treasuries are currently suitable for shorting coll options. Still, it is vital to wait for an optimal entry point.
