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Bonds Test Lower LevelsBonds appeared to be making an effort to attempt higher levels, with a bull wedge pattern forming with an upper bound at 128'10. However, we broke down from this pattern, smashing through the 128 handle into the 127's and then some. The next level of support at 127'22 did little to provide support, though we finally bottomed out for now just above 127'08. Currently, we are seeing a brief pivot with an attempt to break 127'22 from below which is meeting resistance confirmed by two red triangles on the KRI. If we are able to break this level, the next target is 128'01. The Kovach OBV has flattened out suggesting we won't expect much in the way of momentum for now. If we fall further, 127'08 should provide support, then 127'01.
CBOT:ZN1!
by quantguy
Bargain hunters go shopping into tech and support US IndexesMorning Jumpstart Macro View and US market recap 31-01-22 US ended the week with a bang as bargain hunters went shopping to support the broader US market. Tech was again the favoured stocks which lifted the SP500 while the DOW lagged the enthusiasm. There may be some end of month window dressing on the cards also which may have provided some support. For a deeper look at the price action, key levels and what I see playing out...watch the video and feel free to leave any comments. View more at www.tradethestructure.com
CBOT:ZB1!
by TradeTheStructure
2
TNX - 10Yr Yields Sell Offers and Bond VX / Trouble Bond Bagholders just never learn - this Secular Cult is doomed to extinction. The two-year Treasury yield posted its biggest single-day jump since the market volatility of March 2020. Of course, this was after Federal Reserve Chair Jerome Powell promoted the Policy Flip Flop that the Fed will raise rates in March, and left the screen porch door open for a quicker than-anticipated pace of rate increases. The Dot Plot is wiggling in excitement. IN reality, the FED will begin to Temper expectations. It is what they do - Lie Cheat Steal / Delay. 10 Yr Yields have seen another fantastic ROC-driven Spike which advanced well ahead of the Pre-Spring Meltup in 2021. __________________________________________________________________ TNX will provide a very large indication as to how the preset Wedge on the ES/NQ resolve, likely this week... Keep it in purview at all times, sudden violent reactions are to be expected.
TVC:TNX
by HK_L61
Head and Shoulders Breakdown in BondsAfter breaking down from our head and shoulders pattern, bonds have found support at lower levels and have attempted a rebound. The level 127'08 provided good support confirmed by a green triangle on the KRI, and we saw a nice pivot there. We were able to break above 127'22, the next level above before retracing and stabilizing above 127'08 again. It appears that ZN is attempting to stabilize in this area, as we mentioned in the reports. The Kovach OBV has leveled off, so we anticipate the price action to be range bound between these levels.
CBOT:ZN1!
by quantguy
FX beacon- why AUD traders needs to focus on the US yield curve Lots of chatter in the market about the US yield curve headed ever closer towards inversion – clearly, much of this move has been driven by short-term rates which have seen 2yr Treasuries push to 1.19% (the highest since Feb 2020), with fed funds futures pricing close to 5 hikes through 2022. I have shown the US 2s v 10s spread, but US 5s v 30s is certainly getting smacked and at 43bp is probably the part of the curve that will invert first. So, if we know yield curves have been one of the best predictors of future economic stress and recessions, surely it makes sense that the AUD will co-vary with curve flattening? The AUD being a beacon of cyclicality and growth expectations. For fundamental traders, especially swing and certainly position traders, understanding what a currency pair is most sensitive to can help cultivate a short-term edge. If you know what to look at it can save you a ton of time, right? Well, we can look at Asian equity markets and see AUDUSD fairly well correlated here and we can take our pick of the Aussie yield curve over the US curve – however, in this exercise I see a solid relationship in play between the AUDUSD and US yield curve – it tells me if US long-end rates outperform and 10yr yields drop faster than short-term rates then the AUDUSD is headed below the 70-handle and the December swing low of 0.6993. For those trading the AUD, and who want to know why it's moving from A-B and what could cause it to go to C…the yield curve is your central guide right now.
TVC:US10YShort
by Pepperstone
1
The start of a long train wreakSo in conclusion, with the merals issue, supply issue, housing issue, inflation issue, investors heads in the sand issue, tech issue, incompetent leaders (all of them) issue and FED issue. This chart being a fraction of a fraction of a percent from inversion in 10-7 and already inverted in 30-20 makes more sense then the random PPT rally an hour before close today. The trajectory in my honest opinion is downward for markets and the economy and inversions in the bond market. It appears the bonds are signaling a new black swan, this we will have to wait and see (reference .com, 08, 2014 and the pandemic for more) There will always be gains and plenty of ways of making money during this downturn, always is. Nothing goes straight up or down without the inverse being true too. I am calling for a missive recession, tho this is just my opinion. Let me know what you think? Can the FED save the day? Do you see a recession? I want to hear your thoughts below.
TVC:US30Y
by Joshuakm
doesnt look like risk off/conservative sentiment imho (us10y)bonds have been playing along with the aggressive selling in equities so far, but that looks as if it may be about to change for the near term. if risk off/conservative sentiment were really back in force for broader markets we would see government bond yield continuing to increase as the market drops. what the ten year has been telling me for the past week is that inflows are about to return to stocks for at least a short while. will we v shaped bounce back to all time highs? its almost certain we wont but, much to the chagrin of short sellers and cash hoarders, some sort of long play may be in the cards in the following week, and i imagine bonds could be up next in line at the barber.
TVC:US10YShort
by cerealtrades
The start of a long train of woes for housingThis one will be super simple, not much to be stated here. With big corp and foreign investments going into housing not just in the states but globally, we are seeing some really crazy stuff in housing. This chart looks at new one family houses sold vs new housing permits and privately owned housing units total. In my honest opinion housing is, like everything, in a bubble and worse off it's reflecting the fomo that was in the markets prior to the downturn. Sadly I dont see an end to this housing insanity, not until a new economy rears it's head. This is only adding to the bond issues.
FRED:HSN1F
by Joshuakm
The start of a long train of correlationsSorry for the late post, I had to tweek this chart here. This is a comparison chart showing real disposable income to personal consumption expenditures, personal savings and corporate profit. Notice how the top two are now inverted. It's not 100% but that is your inflation. Less disposable income, higher priced expenditures. On the bottom I was tracking savings vs Corporate Profit. This was caused by the hand outs during the pandemic. This has now reverted back to pre 2020 levels after all that savings caught up in peoples accounts during the pandemic was needed after the money stopped flowing. But, how does this correlate to the previous bonds chart? Well in a subtle and curious way. As the correction in savings happened, inflation kicked up. This is highlighted by a date range. Red date ranges are 08 and the pandemic and the yellow is the inflation start. The key to the bond chart correlation being inflation. Now I get the obvious here, No I dont think the free handouts caused all this inflation, that would be crazy, just something I was tracking is all. In reality there are WAYYYYYY to many things going on to put inflation into a chart. Metals are still close to short supply, tech is hurting bad, the supply chain is still semi frozen and governments are still flip flopping between open and closed.
FRED:DSPIC96
by Joshuakm
The start of a long trainNote: FEEVRWS is only meant to be a analysis and early warning system, and is in no way a substitute for your regular work. Please do your own due diligence and if needed, consult a trusted professional. Today we will be looking at economic correlations and why bonds are moving the way they are. As of right now the 10y and 7y are a quarter of a quarter of a quarter of a percent away from inverting and a inversion percent in the 30y to 20y is as much currently. 30y to 20y is already inverted. There are MANY reasons why and this is not so simple. Bonds are selling off across the board with only the 1mo remaining the same. Tho today seems to be about flat, the trend continues. Housing, rate hikes, savings, inflation, liquidity, fomo speculation and foriagn investments are all tied to this and as a result the analysis will continue with other charts produced today
TVC:US30Y
by Joshuakm
short bondsUS 10year treasury bonds continue being bearish since we recently established a new downtrend, driven by the announcement of the FED to decrease QE. We currently saw a little bit of consolidation, we are now trading at trend resistance while oscillators at maximum, due to time cycles we will see a bearish continuation into february. Ps. bonds will deliver a 2% return at the end of 2024 according to rate hike plans if the FED, while inflation is around and will probably stay above 7 % , who wants to buy bonds in such an environment ? bonds would have to surely deliver a 5 % yoy gain in price. It will take a while to gain that confidence into bonds.
CBOT:ZB1!Short
by MrKrft
Bonds Rally with the Stock SelloffBonds have gotten a lift off the selloff in stocks. An influx of risk off sentiment gave ZN a much needed lift back to the 128 handle. We had dipped in the very lows of the 127 handle, and were appearing to get ready to break into the 126's, when the fallout from stocks caused a notable risk off shift. We have broken through our level at 127'22. As predicted yesterday, we crossed the vacuum zone and touched 128'10, the first level in the 128 handle, before retracing slightly. At the time of this writing, we are hovering just under this level. We will see if the fallout in stocks continues today, in which case, we can expect higher levels, the next target being 128'24. The Kovach OBV has turned solidly bullish, likely a bit more than it would if this were just a simple relief rally. But if the selloff continues, 127'22 and 127'08 are the next targets to the down side.
CBOT:ZN1!Long
by quantguy
High consumer price inflation is good for borrowers, right? Err…Another Market Myth Exposed The Nasdaq index has now declined by 10% from its November high , prompting the mainstream financial media to call it a “ correction ” whatever that means. I think they call it a bear market when it is down by 20% . Many stocks have already fallen by at least that amount, and realistically, it’s all semantics anyway. It’s early days, but what is curious, though, is that high yield , or junk , bonds continue to hold up. To be fair, junk bonds, as measured by the U.S.$ CCC & Lower-rated yield spread reached peak outperformance in June last year and have underperformed since, but yet there have been no signs, as yet, of any rush out of the sector. I heard an analyst on Bloomberg TV yesterday say that he was bullish of credit, particularly junk, because it does well in an accelerating consumer price inflation environment. The theory is that higher consumer price inflation means that companies can increase prices, thereby increasing revenue in nominal terms. At the same time, though, the amount the company owes via its bonds remains the same, thereby decreasing the debt’s real value and making it easier to service. It’s a win-win situation apparently, and that means junk bonds outperform. The opposite should be true under consumer price deflation. Junk bonds should underperform because, with nominal corporate revenues declining, the value of debt goes up in real terms, making it harder for corporates to service it. OK, I thought, channeling Mike Bloomberg’s mantra of, “ in God we trust, everyone else bring data ” let’s have a look at the evidence. The chart above shows the U.S. dollar-denominated CCC & Lower-rated yield spread versus the annualized rate of consumer price inflation in the U.S . Apart from the period of 2004 to 2006, there’s hardly any evidence to suggest that accelerating consumer price inflation is good for the high-yield corporate debt market. Junk bonds were only just being invented by Michael Milken in the 1970s, and didn’t come into popularity until the 1980s, but we can examine corporate bond performance by looking at the Moody’s Seasoned Aaa Corporate yield spread to U.S. Treasuries. Doing so, reveals that, in the first major consumer price inflation spike, between 1973 and 1975, corporate debt underperformed as the yield spread widened. In the second major consumer price inflation spike, from 1978 to 1980, corporate debt briefly outperformed but then underperformed dramatically, as annualized price inflation reached 13%. It goes without saying, of course, that this analysis is just looking at the relative performance of corporate debt under accelerating consumer price inflation. The nominal performance is another matter. Borrowers and lenders ( bond investors ) both got savaged in the 1970s with the Moody’s Seasoned Aaa Corporate yield rising from 3% to close to 12%. The conclusion we must reach is that the level of consumer price inflation does not matter to relative corporate bond performance. It does, however, matter for nominal performance . More semantics, some may say. What really matters is how it affects one’s wallet.
FRED:BAMLH0A3HYCEducation
by ferGOD
One of the Most Important Charts You Will Ever SeeThe bond market often has an inverse relationship with the stock market since it is considered a 'risk off' asset. Bonds generally yield more interest for longer maturities. For example, a bond investor in a healthy economy would expect a greater yield for a 10 year treasury compared to a shorter duration. However, the yield curve can 'invert' (shorter term bond actually pays greater interest) when bond traders believe a recession is imminent. Since the Fed's reaction to a recession is to drop short-term rates to 0% and recessions cause 'risk on' assets like stocks to drop, the smart money will rotate from higher risk stocks (like tech, since it's future cash flows are highly sensitive to the cost of capital) and hide out in bonds to weather the storm and minimize downside risk. Yield inversion info: www.investopedia.com This chart shows the interest spread between 10 and 2 year treasuries in blue. Shaded vertical boxes show where the yield curve inverted in the past. The S&P is in red (at least I think it's red. I am color blind). Note how the shaded boxes start just prior to the dot.com peak, the GFC peak, and even the Covid recession. Currently the interest spread is heading back towards zero as the Fed is set to hike short-term rates to combat inflation, likely beginning in March. At it's current drop rate, the spread will invert in ~Q4 of this year, which means a recession is on the table for the first half of 2023. Keep checking back for updates as I will be watching this one VERY closely.
TVC:US10YShort
by HypnoticStrix
2
Another monumental momentNote: FEEVRWS is only meant to be a analysis and early warning system, and is in no way a substitute for your regular work. Please do your own due diligence and if needed, consult a trusted professional. Before I get into this I urge everyone who sees this chart to back track to the .com bubble on this chart, then move up to 08, then check out pre lock downs. With that out of the way, lets get into the FEEVR Analysis! As mentioned above you should look at the historical data provided on this bonds chart. Today and over the weekend we saw the 30yr-20yr invert. This is bad for a number of reasons but mostly having to do with debt and inflation. as stated previously, the inversion marks the start of what can only be assumed as a flee from 'safe haven assets'. This is bad because bonds as a percent, tightening, has historically preluded some of the biggest economic and market wide black swans. Looking at the bond market it is repeating this trend and only seems to be starting which would make me assume through an educated guess that we are about 1 1/2 to 2yrs out from another major black swan, market altering event. Please, please, please be careful. We can time this and there is sure to be lots of money made during this time, just DONT be the last one to the exit. I am currently working on a analysis on the Comms sector of the S&P. That will be out tomorrow. Ic alle dit, telecommunications is rocking and internet is failing. I have identified manipulation in this sector on RRG and now I am just trying to nail it down on the charts here for you all to see. Happy monday everyone!
TVC:US30Y
by Joshuakm
US10Y approaching a structured topThe US Government Bonds 10 YR Yield has been trading within a Channel Up since the early August low. The price is currently way above the 1D MA50 (blue trend-line) and after a strong rally it is now within a structured Channel Up. The pattern resembles the October structured Channel Up, which led to a top and pull-back back below the 1D MA200 (orange trend-line). Assuming this stands again, we should be expecting a top by the end of next week. In any case, if the 1.695 Support breaks earlier, the target would be the 1D MA200. -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** --------------------------------------------------------------------------------------------------------
TVC:US10Y
by TradingShot
2
The market is overly complacent about interest rate riskMarkets Have Been Celebrating No Corporate Tax Hike Stocks have been marching higher as the risk of a near-term corporate tax hike evaporated due to hard bargaining by centrist Democrats Joe Manchin and Kristen Sinema. Prediction markets are now putting the odds of no corporate tax hike at about 88%: www.predictit.org In fact, the single largest line item in the Build Back Better Act is actually a large tax *cut* which disproportionately benefits the highest earners. That's certainly a bullish development for markets, because it means more billionaire money chasing stocks. But They've Been Ignoring the Risk That Interest Rates Will Rise I think markets are ignoring interest rate risk, though. The passage of the Build Back Better act means that the US Treasury will be issuing a lot more treasury bonds over the next few years in order to fund new spending, and it will be doing so at a time when the Federal Reserve is tapering its bond-buying program. That means that private investors will have to absorb that over-supply of treasuries. And private investors are likely to demand higher interest rates than the Federal Reserve would. In other words, a supply-and-demand shock in the bond market could be about to send interest rates up. Bonds May Have Just Flashed a Warning Sign Today TLT (a major treasury bond ETF) made a big bearish engulfing candle today and closed below the 200-day EMA. (Bond prices move the opposite direction from rates, so rising rates = falling bonds.) The move came after the Fed's announcement that it will cut bond-buying in half this month and stop bond-buying altogether by mid-next year. I bought a TLT put yesterday and took profit on it today at the 200-day EMA for a 30% gain, but TLT actually continued downward and ended the day below the 200-day. It still has support from the 20-day EMA, so the question tomorrow is whether the 20-day will hold. If TLT doesn't hold support at the 20-day, then I think we're likely to see tech and pharma stocks follow it down. We could well be at the beginning of a significant correction for both bonds and stocks. Rising rates would be bad for growth companies, and especially bad for cash-poor companies that finance their growth through debt. (Pharmaceuticals, for instance, could be especially hard-hit.) Rising interest rates make it harder for those companies to get financing. The Nasdaq index has recently been selling off whenever rates rise (and bonds fall). Rising rates are better for banks than for tech, and could lead to outperformance by XLF. Smart Money Has Been Going Short Bonds for Months For the last couple months, a lot of smart money has been going short bonds on the expectation that bond rates will rise and bonds will fall. Ordinarily I'd hesitate to pile into such a crowded trade, but sometimes the crowd is right. The put/call ratio on TLT is 1.7, a big bearish bet. And an indirect way to be short bonds is to be short tech. The put/call ratio on the tech-heavy QQQ right now is an even more bearish 2.0. If you have heavy long exposure, especially to tech and growth, now is probably a good time to put some hedges on. Markets Have Been Celebrating No Corporate Tax Hike Stocks have been marching higher as the risk of a near-term corporate tax hike evaporated due to hard bargaining by centrist Democrats. In fact, the single largest line item in the Build Back Better Act is actually a large tax *cut* which disproportionately benefits the highest earners. That's certainly a bullish development for markets, because it means more billionaire money chasing stocks. But They've Been Ignoring the Risk That Interest Rates Will Rise I think markets are ignoring interest rate risk, though. The passage of the Build Back Better act means that the US Treasury will be issuing a lot more treasury bonds over the next few years in order to fund new spending, and it will be doing so at a time when the Federal Reserve is tapering its bond-buying program. That means that private investors will have to absorb that over-supply of treasuries, and they are likely to demand higher interest rates than the Federal Reserve would. A supply-and-demand shock in the bond market could be about to send interest rates up. Bonds May Have Just Flashed a Warning Sign Today TLT (a major treasury bond ETF) made a big bearish engulfing candle today and closed below the 200-day EMA. (Bond prices move the opposite direction from rates, so rising rates = falling bonds.) The move came after the Fed's announcement that it will cut bond-buying in half this month and stop bond-buying altogether by mid-next year. I had bought a TLT put yesterday and took profit on it today at the 200-day EMA for a 30% gain, but TLT actually continued downward and ended the day below the 200-day. It still has support from the 20-day EMA, so the question tomorrow is whether the 20-day will hold. If TLT doesn't hold support at the 20-day, then I think we're likely to see tech and pharma stocks follow it down. We could well be at the beginning of a significant correction for both bonds and stocks. Rising rates would be bad for growth companies, and especially bad for cash-poor companies that finance their growth through debt. (Pharmaceuticals, for instance, could be especially hard-hit.) Rising interest rates make it harder for those companies to get financing. The Nasdaq index has recently been selling off whenever rates rise (and bonds fall). Rising rates are better for banks than for tech, and could lead to outperformance by XLF. Smart Money Has Been Going Short Bonds for Months For the last couple months, a lot of smart money has been going short bonds on the expectation that bond rates will rise. (Bond prices move the opposite direction from rates, meaning that rising rates cause prices to go down.) Ordinarily I'd hesitate to pile into such a crowded trade, but sometimes the crowd is right. The put/call ratio on TLT is 1.7, a big bearish bet. And an indirect way to be short bonds is to be short tech. The put/call ratio on the tech-heavy QQQ right now is an even more bearish 2.0. Inflation Numbers Will Determine Where We Go from Here FOMC futures are currently forecasting that the Fed will hike rates 2-3 times by the end of next year, with a small chance of 4 rate hikes. As But as John Cochrane argues, FOMC futures have historically tended to be too hawkish: johnhcochrane.blogspot.com There's a lot of political incentive in Washington, D.C. to keep rates low, so the Fed almost certainly won't raise rates until inflation forces their hand. (Raising rates is primarily a tool to control inflation.) So keep an eye on the inflation numbers as we go forward from here. Inflation over the past decade has tended undershoot expectations, and many economists still believe that the current bout of inflation will prove to be transitory. So it may well turn out that we just get one or two rate hikes, and then inflation stabilizes and everything returns to normal. For now, I am expecting a short-term correction in both bonds and stocks, but a stabilization in the medium term. Shipping prices have been falling: And commodities prices look like they may start to come down as well: Hopefully these are early signs that inflation will be transitory after all. But the last reading on the Citi Inflation Surprise Index was an all-time high, so beware. If the pandemic has taught us anything, it's that there's definitely a limit to how far and fast we can push deficit spending before inflation kicks in. Pandemic deficit spending in 2020 caused high inflation in 2021. The question now is whether inflation will run away or normalize. This is an unprecedented situation, so nobody really knows. But a lot will depend on whether the Fed and Congress can practice some fiscal discipline, or at least convince markets that they will.
NASDAQ:TLTShort
by ChristopherCarrollSmith
15