5/15/2014

Copyright 2014 Arbor Research & Trading, Inc. All rights reserved. This material is for your private information, and we are not soliciting any action based upon it. This material should not be redistributed or replicated in
any form without the prior consent of Arbor. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such.

US 10 Year Note Breaking Out of Trading Range

The US 10 Year Note is breaking out of its
trading range established in the beginning
ofFebruary,whichwasadifferenceofonly
22.84 bps between the highest (2.8045)
and lowest (2.5761) close over 70 trading
days. Looking at similar instances in the
past, we find that there have been 11
occurrences since 1990 where the 10 year
yield was stuck within a range of 30 bps or
lessfor60daysorlonger.Thetablesbelow
compare what happened 5, 10, 20 and 30
days after breaking out of the top and
bottomofsimilartightranges.

Bullish Breakouts (break bottom of range)

Breaksthroughthebottomofsimilartightrangeshaveseenfollowthrough10dayslater,withyieldslowerinall
instancesbyanaverageof6bps.Yieldswerestilllower60%ofthetime20and30dayslater.Twoinstancessawyields
reverseandclimbbackhigherbyday20.

5/15/2014
Copyright 2014 Arbor Research & Trading, Inc. All rights reserved. This material is for your private information, and we are not soliciting any action based upon it. This material should not be redistributed or replicated in
any form without the prior consent of Arbor. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such.

Bearish Breakouts (break top of range)
Breaksthroughthetopofsimilartightrangessawyieldshigher83%oftime10dayslaterbyanaverageof3.98bps,with
67%stillhigheratday20and30.

AQA Technical Outlook

ThebreakoftherecenttradingrangehaspushedtheUS10YearYieldjustbelowMonthlyResistance2.526/2.560and
intooverlappingQuarterlyResistance2.443/2.536(held7qtrs).Failuretoholdthisresistanceclusterwouldconfirma
breakouttoloweryieldsandpointtoamorelastingshiftindirection.However,notethatshortmomentumstudieshave
reachedshorttermoversoldlevels,whichmaysignalatleastapauseinrecentbullishmomentum.(Seedailychartto
thelowerleftandweeklycharttothelowerright).