EURO BUND & US 10 YEAR T-NOTE

On January 6th I discussed government bonds for Germany & U.S. and drew attention to negative divergences on momentum indicators. U.S. 10 Year T-Notes and Euro Bund prices have generated negative divergences as they approached their previous high levels and both government bond prices tested their intermediate term resistance levels with negative divergences. The battle between bulls and bears resolved in favor of the bulls in the equity markets. With strong data from U.S. and better than expected debt sales in Euro Zone, investors said “RISK ON” in the short-term. Equity indices rebounded and bonds weakened.

Euro Bund price failed to break above 139 levels and fell below the strong resistance. U.S. 10 Year T-Notes didn’t even breach the horizontal resistance at 132 levels. We should now expect more weakness in bonds that would pull prices towards their 200 day moving averages Euro Bund: 133.6, U.S. 10 Year T-Note: 128. Weakness of this kind will help equities in the short/intermediate term. Strong resistance for Euro Bund is still at 139 levels and for U.S. T-Note at 132 levels.