Archive for March, 2010

Rising Yields On U.S. Treasury 10-Year Note Approaching Key Level

Posted in 10-Year Treasury Note (TNX) on March 29th, 2010 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

The enormous need for the U.S. Treasury to raise cash now may be coming home to roost. An almost endless supply of U.S. Treasury bills, notes and bonds that have to be auctioned off on a regular basis is now battling corporate debt issuers for investors. This is underscored by the fact that a number of short-term corporate fixed income yields are now trading below those of U.S. treasuries. Further out the yield curve, the spread between AAA corporate bonds and U.S. treasuries has narrowed dramatically over the past 24 months from almost 120 basis points to just 30.

Technically, the yield on U.S. Treasury 10-year notes (TNX) is now approaching key resistance with its price approaching key support (since there is an inverse relationship between the two). A break above the 3.95% level on U.S. Treasury 10-year notes would clearly be reason for concern since the next key resistance area (in terms of yield) sits near the 4.70% area.

Such a move up in yields would not only cost U.S. taxpayers more in interest expense, but it would also likely dampen both housing sales and starts with mortgage rates rising in concert.


The Philadelphia Gold/Silver Sector Index Poised To Advance

Posted in Philadelphia Gold/Silver Sector Index (XAU) on March 21st, 2010 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Although a continuation of the rally in the U.S. dollar index (DXY) over the past few months had been expected to keep a lid on precious metal prices, the Philadelphia Gold/Silver Sector Index (XAU) has defied that theory. Clearly, there is an inverse relationship between precious metals and paper currencies of all types. However, after staging a solid correction from the December 2009 peak, the bid for gold and silver has remained relatively firm as both the Euro and British pound have sunk. By contrast, the DXY has gained strength versus each of those currencies during this period.

Still, global buyers as well as speculators taking a longer-term view of the prospect of mounting sovereign debt obligations have not apparently lost their appetite for gold and/or silver. Neither have saver nations like China and India.

Evidence of this situation can be seen by looking at a chart of the XAU on the weekly time frame. With weekly stochastic studies now rising bullish, the XAU appears poised to break, possibly, above key “mid-channel” resistance at 173.50. If it does, such a “break” would have very bullish implications for precious metals in general, and gold and silver in particular. A failure to do so, on the other hand, would be reason to reevaluate.