Looking at the last 5 days in the December 10-year, the market clearly has a bearish tilt with today making five days of consecutive lows and the contract trading below the 100-day moving average last Thursday at 139-05. Currently, we are trading four-month lows with today reaching 138-13 and we are now trading at 138-19.  The main factors for this move lower is the ongoing talk in Congress that a coronavirus relief bill will be past at some point. It’s not a matter of if it will be passed, but rather when.   If Biden is elected, many feel like the number could be bigger in terms of dollars than what is being discussed now.  

This has all contributed to the near-term weakness that we are currently seeing in the note complex. Now switching gears, a bit, the virus is getting much worse now and many in the health industry feel like the major second wave has arrived with autumn coming to an end. That being said, I wouldn’t recommend being to bearish at these levels because if the economy goes back into a partial or full lockdown again to try to curb transmission, the net effect will result in the economy coming to an abrupt halt like we saw in March. So, even though the treasuries are trading terrible, any significant slowdown in the economy can push rates lower and price higher in a very quick move.

10yr Note Dec ’20 Daily Chart
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Greg Perlin

Senior Market Strategist
Greg is a former Chicago Board of Trade member. He was an independent floor trader, pit broker and floor broker with Cantor Fitzgerald. Some of his clients included traders from Morgan Stanley and Lehman Brothers. He also acted in the capacity of desk manager for the morning trade desk. Greg was part of the elite Lind Plus Division for 10 years before joining RJO Futures in 2011.
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