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Forex Flash: 10-year US treasuries eye FOMC – RBS

According to William O'Donnell at RBS, “We continue to see a near-term 1.70% to 2.11% range for 10-year US Treasuries. Key support remains at 2.11% for 10yrs, while the first resistance is at 1.90% - 1.93%. We recommend to watch for the ascending bear channel lines (1.93% in 10s and 3.10% in bonds) – breaks through could extend the rally while a close above 2.11% in 10s opens up 2.30%.”

Treasuries have cheapened further overnight with 10y note yields now sitting a few bp for 10-month highs as the markets fret about today's release of the FOMC Minutes. Very dovish Minutes from the Bank of England were outweighed by a barely covered 10y Bund auction and a solid performance by risk assets (peripheral spreads up to 8bp tighter led by good inflows).

Asian stock markets were led higher by Korean shares, European stocks are mixed and S&P futures are showing +0.5pt here at 7am. Our overnight Treasury flows saw asset managers buying of 5yrs versus FV futures, central bank selling in 3-years, European bank selling in 10-years and a fund manager buying in 30-yrs. Overnight Treasury broker volume perked up to 114% of the 10-day average.

Forex Flash: GBP/AUD now related to 2-year swaps – Westpac

The relationship between the GBP/AUD and 2 year swap spreads has been fairly useful historically, though it started to break down in mid-2011 as markets began to price in RBA easing but AUD suffered little sustained damage, especially as the Bank of England felt compelled to ramp up QE again in response to domestic weakness in 2011. The latest sell-off in GBP/AUD has not been backed by moves in the two-year spread. The minutes from the February RBA meeting reinforced its message that muted inflation means it has “scope” to cut rates again if demand falls short of expectations.
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Forex Flash: IMM data reveals abundance of EUR longs – UBS

According to the UBS Analyst Team, “In terms of positioning we note that speculative investors may now be long the euro, as suggested by IMM data as well as plenty of anecdotal evidence. Overall however, we continue to argue that investors remain structurally short the euro and the Eurozone. What this means, in our view, is that the risk of short-term downward corrections is high, particularly if any of the political issues mentioned in this note were to surprise negatively.”
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