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(Bloomberg) -- Generic bund futures contract is showing an aggressive rejection of its 200-DMA resistance at 162.65, which may suggest it is at the end of the counter-trend move higher seen since early July, Bloomberg technical analyst Sejul Gokal writes.

• See chart here; RXU7 -87 ticks to 161.66
• Momentum has unwound its oversold condition reached days after ECB President Draghi’s Sintra speech and provides green light for near-term impulsive move on contract
  • Nine-day RSI at 45 vs. 16 reached earlier this month before valuation-driven bounce unfolded
• Support at 161.21 and 161.87 ahead of 160.31 month low
  • NOTE: Bund futures oversold objective at 162.60-78, cited in July piece, has been achieved
• Bund 2/10 curve is re-establishing its steepening trend and validating Monday’s bullish hammer candle against the 108bps Fibonacci support; spread now poised to top the 121bps Fibonacci hurdle, which sparked a tactical flattening back on July 12 (see live chart here)
• Elsewhere, UST 10Y yield is showing embryonic signs of recovery against the critical 2.23% support (see analysis)
  • Eurodollar front generic contract (EDZ7) is also rekindling its bearish trend after strong early-month rebound stumbles against the daily and weekly cloud boundaries (see analysis)

• NOTE: Sejul Gokal is a FICC technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

(Bloomberg) -- An increase in the Fed’s UST custody holdings and total net purchases by China and Japan indicate rising foreign demand for Treasuries, Credit Agricole analyst Alex Li writes in July 25 note.

• Demand increase is “conducive to steepeners going forward” because foreign holdings “concentrate in the front to intermediate sector”
• Fed’s custody holdings of USTs increased ~$133b so far this year, “a good proxy for foreign central bank demand” as they account for ~75% of total foreign official holdings
• Foreign net purchases were $46b in May, with China’s holdings up $10b, according to TIC report; Japan’s net purchases totaled ~$56b over past 3 months, according to Ministry of Finance data

To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton

Economic Release Details: {CONCCONF Index ECOD} --SCOTT LANMAN

(Bloomberg) -- Following are forecasts for today’s economic releases as compiled by Bloomberg News.

• Consumer Conf. 116.7; range 110 to 122 (64 estimates)
• Following the presidential election, the index peaked at 124.9 in March, the highest since December 2000
• "The primary driver behind the retrenchment is undoubtedly the Trump administration’s failure to pass meaningful tax, trade, or health-care reform. Incessant political turbulence is also weighing on consumer attitudes”: Bloomberg Intelligence
• Rich. Fed 7; range 6 to 9 (9 estimates)

To contact the reporters on this story: Chris Middleton in Washington at cmiddleton2@bloomberg.net; Vincent Del Giudice in Denver at vdelgiudice@bloomberg.net To contact the editors responsible for this story: Alex Tanzi at atanzi@bloomberg.net Kristy Scheuble

(Bloomberg) -- The Fed balance sheet is likely to shrink to about 13.4% of GDP (an amount equal to $2.6t currently and forecast to reach $3t in 2021), lifting UST 10Y yield by ~20bp this year, 15bp next year and 10bp per year from 2019-2021, Goldman Sachs economist Daan Struyven says in July 24 note.

• Wednesday’s FOMC statement is likely “to hint at an announcement of balance sheet normalization in September,” which should begin in October
• MBS assets on balance sheet should shrink to $1.1t by November 2021, however Fed may eventually opt to sell, depending on what future Fed leadership is disposed to do

To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton