Forex Flash: Deep overbought correction expected with 10-year US treasuries – RBS

FXstreet.com (Barcelona) - According to the RBS Research Team, “We are not bearish Treasuries because we still see evidence of a short base and because of lingering concerns about a probable step-down in Q2 growth/consumption and employment (versus Q1) due to sequestration, Europe, and our belief that the >3% real consumer spending pace in Q1 is unsustainable given real income growth. We expect a correction from a deep overbought condition to give us better entry levels in the coming few weeks.”

Treasuries are overall weaker today despite a rebound in JGB's and Portugal's court struggles over their austerity programs. Semi-core and peripheral EU debt spreads are tighter except in Portugal where spreads are 5bp wider after a court struck down 4 of 9 contested austerity measures. Total Treasury market inter-dealer overnight volume was 127% of the 10-day average.