However, the 2008 financial crisis change all that and the recent volatility in 10-year treasury notes has provided some great opportunities for futures traders. The volatility has been a result of the fear created in the recent market place. Since 2008, investors have been jumping into U.S. investments because of the perception that the U.S. economy will be able to weather the global economic problems. Investors have forsaken high returns to preserve their capital. For most traders U.S. Treasuries is the ultimate safe-haven investment.

In December 2008, when the economic crisis was at its height, 10-year futures hit a high of 130-255. In 2009 when it looked like the worst was over, prices fell back to a low of 111-075. However, every time there is a little bit of investor fear in the marketplace people flood back into treasuries, which push prices higher. Strong fear sentiment re-emerged in 2010 and pushed treasury prices higher but unwound quickly as traders feared that the U.S. debt was spiraling out of control.

The rollercoaster ride didn’t end there. In 2011 prices for 10-year treasury futures spiked again, as the European economy balanced on the edge of collapsing. In mid-September price rallied to a high of 131-300 but since then prices have started to decline again. Politicians are trying to get the latest crisis under control and so far it is working. Equity markets are rallying – a sign of building confidence – and investors are starting to sell their treasuries, which is dragging prices lower.

The question most investors are asking themselves is if the worst is all priced into the market? So far prices are holding good support around 128-290 and last week see saw some price consolidation. Investors need to watch equity markets very closely this week. The “safe haven trade” can unwind very quickly as we have seen in other markets like the U.S. dollar. If optimism continues to build prices could easily break below support at 128-290 and could lead to a test of the next support level around 126-000.

Volume is relatively low at the moment so there is no strong direction either way. Along with equity markets, treasury future traders should also pay attention to the VIX index, which is the “fear barometer” of the marketplace. A drop in the VIX is another sign that investors are feeling more confident and willing to take more risks.

The last market traders should also monitor is the U.S. dollar, which we pointed out is another “safe-harbor.” If the U.S dollar continues to drop, it will impact treasury markets. One of the reasons the U.S. dollar has been so strong is because foreign investors have been exchanging their currencies for the greenback and using that money to buy treasuries.

For more updates from Greg, be sure to visit his blog at TheTradingZone.com