Eoin Treacy's view While one might argue that the fixed income market is currently subject to the whim of momentum traders, the primary participants are total return focused. Pension funds for example are considerably more long-term oriented than the trader at the margin of these hugely liquid markets. With Spanish yields returning to hit 7% today and short-dated German paper posting negative yields, I thought it would be instructive to review the total return indices of various sovereigns.

The Merrill Lynch 10yr+ US Treasury Total Return Index remains somewhat overextended relative to the 200-day but a sustained decline below this week's low near 1970 would be required to suggest swifter mean reversion is underway.

The Bloomberg/EFFAS Germany 10yr+ Total Return Index had become overextended relative to the 200-day MA when it hit a peak below 600 a month ago. It pulled back sharply towards the MA before finding at least short-term support this week in the region of the upper side of the underlying trading range. A sustained move below the 200-day MA, currently near 530 would be required to question potential for a further unwind of the short-term oversold condition.

The Bloomberg/EFFAS UK 10yr+ Total Return Index hit an accelerated medium-term peak a month ago and has been ranging below it since in a steady process of mean reversion. A sustained move below the MA would be required to question the consistency of the medium-term uptrend. The Japanese, Swiss, Australian and Canadian indices have similar patterns.

The Bloomberg/EFFAS Italian 10yr+ Total Return Index bounced emphatically from the December low and has held the majority of the advance to date. However, it will need to break the short-term progression of lower rally highs to negate current scope for continued downside.

The Bloomberg/EFFAS Spanish 10yr+ Total Return Index has been mostly rangebound since 2005 and is currently testing the lower boundary. A clear upward dynamic will be required to stem current potential for additional weakness.