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Treasuries

Shorting EUR again, now on the pullback.The euro, as well as all its correlated currencies and related products, crossed critical support levels a few weeks ago and right now is in a pullback within the mid-term downtrend. The mid- and long-term trend are in phase 4 (bearish), and the RSI on the monthly chart is 23.32, which make it unreasonable to hold it. After our shorts and currency strategies a few weeks ago, right now we are 50% in EUR and 50% in USD (take into account we are, mostly, European based), but we will advance everything to USD to follow the trends of the world economy and the recession in the next months. Trade: Financial engineering: cash, not derivatives. Time horizon: >6 months. Risk mgmt: +20% of our treasury Exits: We do not contemplate exits for now, but we are active quant traders and monitor the market daily.
Short
by blockmas
$TLT - 20Y Bond index - BUY?Clearly, inflation is a problem and I for one thought the rates rising were overblown after the first hike. (I was very wrong here) With that said, we are likely in the topping process for inflation, pending any new black swan events happen. The indicators show 4 things in regards to this bond. 1. No momentum, 2. Bear market trend 3. below the historical anchored V-WAP (so most who own this EFT are underwater) 4. Bottoming on a Fib. The best way to play this is to buy tail-risk long-dated calls. Keep position small given the macro market, but clearly, this is an opportunity that hasn't been available for a while in the bond market.
NASDAQ:TLTLong
by rwoods187
EUR/USD falls to new 20-year lowThe euro is in negative territory today, after posting six straight days of losses. EUR/USD is trading at 0.9553 in Europe, down 0.41%. September can't end fast enough for the euro, which has declined a massive 4.8% against the dollar. Earlier today, EUR/USD fell to 0.9536, its lowest level since June 2002. With the war in Ukraine escalating and Nord Stream reporting that its pipeline was deliberately damaged, it's hard to be optimistic about the euro's outlook. The sham referendums in Russian-occupied Ukraine have ended and predictably, the vote to join Russia was close to 100%. Moscow is expected to declare on Friday that the territories are being annexed to the Russian Federation, sparking fears that Russia could resort to nuclear weapons to defend what it claims is Russian territory. There was a further escalation in the Ukraine war last week, as explosions at the Nord Stream 1 and 2 pipelines are suspected to have been sabotaged. Nord Stream 2 has been shelved and Nord Stream 1 has been shut down for weeks, and any faint hopes that Russia might renew gas exports through Nord Stream have been dashed. European natural gas prices have jumped in response to the news. The US dollar continues to rally, and 10-year Treasury yields pushed above 4.00% earlier today, for the first time since 2008. The markets are showing a healthy respect for Fed hawkishness, even after inflation weakened in the past two inflation reports. There is some optimism that the current rate-tightening cycle is reaching its end, with Fed member Evans stating that it will be appropriate to slow the pace of tightening at some point. For now, the US dollar has momentum, driven by an aggressive Fed and weak risk appetite. EUR/USD is testing support at 0.9554. Next, there is support at 0.9419 There is resistance at 0.9640 and 0.9711
by OANDA
The Bond Market Reacts to the FOMCBonds have slid further and there is no relief rally insight. The markets were hoping for a 'dovish hike' in the sense that the 75 bps hike would be followed by dovish rhetoric. In fact it was the opposite. Yields have maintained highs pressing prices further down. We are hugging 113'12 and expect support there. If not, we will use Fibonacci extension levels to determine support levels further down. Our targets are 115'03 and 115'29 if we get our relief rally.
CBOT:ZN1!Short
by quantguy
Why Bonds Might Be Nearing LowsBonds have continued their decline as the markets price in a potentially historic FOMC rate hike this week. Inflation data suggests that the Fed's rate hike trajectory is not really working and inflation is still soaring. On the other hand, multiple indicators suggest that we are in a recession, and the Fed will have to pivot their hawkish stance after this last rate hike. If that is the case, then we expect the bond market to be nearing lows. We have one more technical level before we will have to start using inverse Fibonacci extension levels to predict lows in bonds again, as 113'12 is our last technical level. The Kovach OBV also appears to be leveling off. The next targets from above are 115'03 and 115'29.
CBOT:ZN1!Long
by quantguy
2
Bond Market Reacts to Nonfarm and FedBonds fell again, hitting our next target at 115'29. Yields are creeping up as the markets are pricing in the next rate hike, expected to be 50-75 bps . Nonfarm payrolls gave us some insight into economic conditions: unemployment rose to 3.7%, with a headline miss and downward revision. This suggests that the economy is weakening further, and we are in a period of stagflation. Yields subsequently weakened and we are seeing a slight pivot off 1529. If we rally, we could hit 116'20 or even 117'08. If the figures are hotter than expected it should bolster the Fed's hawkish rhetoric and we could break through 115'29, to 115'03.
CBOT:ZN1!Short
by quantguy
Hawkish FED Keeps USD In UptrendUnfortunately, stock markets are where they are, and we cannot force them to move in a particular direction. We see a neutral status at the end of the summer, but this volatility may come back in September. We may see some interesting price action already this week when US will release its important jobs data. Fed watches this data closely, but what’s important is that they were very clear lately and said that they will stay hawkish even if FED’s actions will cause some harm to the US economy . So for now, the USD remains in uptrend because of US yields. From an Elliott wave perspective, we see US yields trying to break higher into a fifth wave now, so this can cause even more weakness XXX/USD pairs. But when the fifth wave will hit a new high on yields, that’s when we should be aware of a new change in cycle, ideally later this year. But any major reversals in cylce will not happen that easily, especially now with current FEDs actions and potential bad data. Bad or good data; it doesn’t really matter; the stock market will have a hard time turning back to the highs. Yes, stocks can stabilize if we see bad data, but if we will start seeing bad data week after week then this means a big economic slowdown and a potential recession. Expensive capital, inflation, and economic downturn is a bearish case for stocks. There is simply no "free" cash available to be invested in the stock market.
TVC:US10Y
by ew-forecast
4
Stagflation is comingReal interest rates will probably start to fall soon because of stagflation. Real interest rates can be measured by subtracting inflation expectations FRED:T10YIE from US treasury yields FRED:DGS10 . Treasury yields will likely fall along with unemployment as measured by initial claims FRED:ICSA . Initials claims has started to slowly rise and when it does treasury yields will probably go down. Inflation expectations will likely take longer to fall because it takes longer to get prices to slow down than for unemployment to rise. Businesses will more likely fire people than lower their prices to protect their profits and now inflation expectations are probably well anchored. This should be bullish for silver OANDA:XAGUSD and gold OANDA:XAUUSD and negative for the dollar TVC:DXY . When looking at the charts for primary metals and DXY it also looks like they are ready for a major turnaround. A description of the above can also be found here: www.forbes.com
FRED:DGS10Short
by lucky_human_foot
2
Forget All Other ChartsIgnore all the other charts right now. They are based on DOLLARS. The dollar is permanently unstable and your imperialist overlords are here to take away your spending power. We're due to see bearish action similar to April 5th (pink dot). The question is, will we see a lower high in relative yields, or will we set a higher low and possibly become uninverted, and return above 1.0 once again? Consider that we just set a higher high in the S&P medium term and it could have simply been a move to fool the crowd. On the other hand, debt is at all time highs, and rates even at this level mean systemic insolvency. Raising rates further means quicker insolvency. I say just get it over with or don't do it at all. Inflation year over year is, realistically, 20-40%, each year since 2020. Key interest rates aren't even 10% of that. There is no way they will be able to control this in any way, shape or form, or manufacture a so called "soft landing". Rates rise >1.0 = total collapse, then easing Rates bounce <1.0 = unrealistic rally blow off top, more tightening to trigger the crash I think I used too many arrows but hopefully it makes sense. Good luck and don't forget to hedge your bets.
TVC:US10Y
by fringe_chartist
11
Dollar and treasury yields are back on the marchU.S. Treasury yields moved higher on Friday to their highest since July 21 and U.S. stock futures fell by almost 1%, along with similar losses in Europe. The yield on the benchmark 10-year Treasury note was up 8 basis points at 2.967% as the Fed indicated July meeting minutes that it would continue hiking rates until inflation slows down significantly, although the central bank could soon decrease its pace of tightening. The 10-year Treasury yields above its 100-day exponential moving average, yields may extend its strength to 3.00% mark with the dollar's rally.
TVC:US10YLong
by AlyaAkram
S&P vs UST YieldsYields are going crazy right now. Everything seems like a disaster. Oddly enough, when these particular yields invert (gray boxes), the 10/2, it is historically not the best time to go short, but rather you would have benefited if you had shorted AFTER yields uninverted above 1.0(red dots). Now, okay, maybe this time is different, a ratio of 0.87 isn't exactly sane at this point and maybe the whole thing comes crashing down. It's also true that about a third of this chart represented a fundamentally bullish and arguably much more healthy market, and this is true, we could have samples that don't exactly reflect current conditions. What I'm not so certain about is the idea that the market being bearish or bullish is somehow a barometer of what's going to happen next. At the end of the day, monetary policy rules market prices and perhaps this can be taken as sign that perhaps we don't *really* know what's going on behind the scenes, which strings are being pulled, and how hard. The market is not the economy. The FED has a trading desk at the NY Stock Exchange. Let us ask this question: if it is not absolutely necessary in their eyes to have such a trading desk, why would it exist? Could it be the case that it's simply there and yet they aren't using it? I think that is the less probable scenario. Take it as you will. Considering the sharp cataclysm of yield inversion, I'm not sure this could constitute trading advice, but I thought it was interesting, as it could be considered bullish evidence for a "last rally" into a mammoth sized selloff. What do you think? Still bearish? Bullish all the way? Even more confused now!? Have I gone completely crazy?? Let me know! Thanks for taking a look, take care, and don't forget to hedge your bets.
TVC:US10YLong
by fringe_chartist
6
US02Y/US10Y bonds signals end to market rally. Bear FlattenerUS02Y up ~6% US10Y up ~0.12% Definition of a Bear Flattener = market go down. Is it a perfect indicator? Of course not. But the tendency is that bear flatteners mean money is coming out of the market and going into short term bonds where it can come out of the quickest if market turns around. So the short term bonds act as a kind of pump/dump for the market. We are getting bear flattener headwinds ahead of CPI print next week. Next week maybe market flattens out, momentum dies, slow stochastic falls below 80, and price sets up to go below prior "higher lows". Keep on alert.
TVC:US02YShort
by DarthTrader1357
1
Update on long duration bondsHello everybody! I wanted to make a quick update on where I think the 10y and 30y bonds will be headed in the next few months, as in the past, I've been talking quite a bit about deflation and a recession being close. We have seen TLT rise significantly, yet I think there is more upside. In the short term, I can see a further pullback, but in my honest opinion, the drop over the last two days was caused mainly by Pelosi visiting Taiwan and bonds getting overbought on lower timeframes. The 30y yields were rejected at the monthly pivot, while the 10y yields bounced at support and were denied at resistance. Yields are still in a short-term bearish trend, and there is no confirmation of a reversal yet, although the trend might have changed. It all depends on the situation between China and the US, as the more the tensions between those countries increase, the higher inflation will be, and therefore the higher rates will be. If China starts aggressively selling US bonds, this could create chaos in the funding markets. If the US starts banning Chinese imports or exports, the US bond market could explode, and yields go to the moon. This would force the Fed to step in and do unlimited QE / yield curve control. Essentially we are stuck in a scenario of mutually assured destruction here, and there is no way either one will come out as a winner in the short term. I believe that we are in a deflationary/disinflationary period, which could be disturbed at any moment if China invades Taiwan. The Russia/Ukraine war pushed inflation higher at a time when inflation was about to start slowing down, and a China/Taiwan war could push inflation higher at a time when inflation was about to slow down. TLT could quickly reach 125-135 in the next few months. However, I don't believe bond yields are going negative soon. It will be challenging for the market to have negative nominal yields when inflation is so high and at a time when the Fed might be forced to intervene and do YCC.
NASDAQ:TLT
by BitcoinMacro
Monster Bear Flattener AheadHistorically - inflation has never been defeated except when a long term bond (in this case the 30 year) yield is above the rate of inflation. The collapse of supply has meant too much money chasing too few goods. This means more and more capital is sucked into a blackhole of wage-price spirals. Currently the US has trapped itself against a wall and a hard place in that the 30 year treasury yield is well below the inflation rate. A situation which hasn't happened to the US in 100+ years (I can't speak for the Civil War Era, I haven't found data back that far). You can see the 30 year yield history by searching Google for "Fred 30 year yield" (Can't post links yet). The only logical path to achieve this is a bear steepening when people realize that inflation cannot come down otherwise and then begin a sell-off. Yield curves will stay inverted since the FED has put a floor on interest rates which the treasuries are already starting to get close to. "Restrictive rates" = = a bear flattening environment. We are currently in a "bull steepener" attempt which will fail.
TVC:US30YShort
by DarthTrader1357
1
The Real Cost of Fed Rate HikesCBOT_MINI:10Y1! CBOT_MINI:2YY1! The Federal Open Market Committee (FOMC) is scheduled to meet on July 26-27. Market widely expects a 75-basis-points (bps) Fed Funds rate increase, from current target of 1.50%-1.75% to 2.25%-2.50%. The call for a 100-point hike, while still feasible, is weakened after U.S. gasoline price dropped 70 cents per gallon in the past month. New data hints that the runaway inflation may be contained. Federal funds Rate is the interest rate that banks charge each other to borrow or lend excess reserves overnight. It is the most important global interest rate benchmark, as it directly or indirectly influences the borrowing cost for governments, corporations, and households. By the end of July, Fed Funds would have gone up by 2.25% (assuming 75 bps hike in July) from zero before March. The Fed is not afraid of raising rate even higher until inflation moves back to its 2% policy target. How much will a higher interest rate cost for government, business, or household? I will illustrate the impact of 100bps rate increase in this analysis. All data comes from either the Fed or USdebtclock.org, unless otherwise noted. Total Debt : By the end of Q1 2022, the total debt outstanding in the U.S. by both public and private sectors is $90.1 trillion. Mind-boggling. What does the number mean? • U.S. GDP was $23.0 trillion in 2021. Debt-to-GDP ratio is 3.92. It would take all Americans four years to pay off their debt, without spending or paying interest. • US population is 332,403,650 as of January 2022 per US Census Bureau. Debt per capita is $270,949. Each time a baby is born, he or she already owes more than a quarter million dollar. US National Debt : $30.6 trillion based on USdebtclock.org real-time calculation. This is just the debt owed by Federal government and various federal agencies. • National Debt to GDP ratio: 133%. • Federal tax revenue is estimated at $4.4 trillion in 2022. If our government just levies taxes and does nothing else, it will take seven years to pay off the debt. • Federal budget is $6.0 trillion in 2022, with budget deficit running at $1.6 trillion. Interest on debt is $440 billion, the fourth largest budget item. If interest rate goes up 100 bps across the yield curve, federal government will have to come up with $306 billion extra to service the debt. • Federal budget in 2022: $6.0 trillion o budget deficit $1.6 trillion o Interest on debt $440 billion (4th largest budget item) o Remark: $306 billion extra to service the debt, if interest rate goes up by 100bps • When all the rate hikes are over, annual debt interest payment could be over $1.0 trillion. It would become the 3rd largest budget item, behind Medicare ($1.4 trillion), Social Security ($1.0 trillion) and ahead of Defense ($751 billion)! State and Local Government debt : $3.3 trillion, of which $2.1 trillion from state governments and $1.2 trillion from local governments. • If interest rate goes up by 100 bps, state and local governments will have to come up with $33 billion extra to service their debt. • We may expect tax hikes from state and local governments, while public services may be cut back at the same time. US Corporate Debt : $11 trillion, which includes all debt issued by non-financial corporations domiciled in the U.S. • If interest rate goes up by 100 bps, American businesses will have to come up with $110 billion extra to service their debt. • We may expect higher prices for goods and services, as businesses pass on the interest cost to consumers. • Companies with high debt ratio may increase the chance of delinquency. US Household Debt : $23.5 trillion. This includes mortgage, auto loan, credit card loan and student loan, etc. • Personal debt per citizen is $70,304. If interest rate goes up by 100 bps, each person will have to come up with $703 extra a year to service their debt. • American families are fighting with a higher cost-of-living on multiple fronts. If the U.S. falls into a recession, their financial situation will worsen significantly. • Mortgage delinquency is expected to rise significantly. The remainder, approximately $21 trillion, is outstanding balance of credit instruments issued by banks and other financial institutions. Believe it or not, we have only just scrubbed the surface of our mounting debt problem. Most government liabilities are unfunded or underfunded. Each year, the Federal Government borrows new money to pay off the maturing debt. Medicare, Medicaid, and Social Security are pay-as-you-go programs. Government taxes current workers to pay for the benefits of retirees, without any money saving up for current workers. No one has a crystal ball if the benefits are still there when they reach retirement. With such a depressing future ahead of us, are there any trading opportunities? The answer is yes. I am counting on the inverted yield curve to return to historical normal. Yield curve plots the interest rates on government bonds with different maturity dates, notably three-month Treasury Bills, two-year and 10-year Treasury Notes, 15-year and 30-year Treasury Bonds. Bond investors expect to be paid more for locking up their money for a long stretch, so interest rates on long-term debt are higher than those on short-term. Plotted out on a chart, the various yields for bonds create an upward sloping line. Sometimes short-term rates rise above long-term ones. That negative relationship is called yield curve inversion. An inversion has preceded every U.S. recession for the past half century, so it’s seen as a leading indicator of economic downturn. On July 21st, the yield on two-year Treasury notes stood at 3.00 percent, above the 2.91 percent yield on 10-year notes. By comparison, two-year yields were one percentage point lower than the 10-year yields a year ago. Why are we seeing yield curve inversion now? Short-term yield directly responded to Fed rate hikes. It has gone up 225 bps in five months. Longer term yields are determined by credit market supply and demand. The prospect of an upcoming recession held off lending by businesses and households alike, keeping the yields relatively stable. In my opinion, yield curve inversion could not sustain for long. Borrowers would flock to lower rate debt, pushing up demand for longer term credit. Market force would revert the yield curve to a normal one with interest rates on long-term debts higher than those on short-term ones. Are there any instruments we could leverage to trade the reversal of yield curve inversion? Long the Spread of CBOT Micro 10-Year Yield (10Y) and 2-Year Yield (2YY) . Traditional Treasury Futures are quoted in Treasury Notes price, which can be viewed as the present value of future payments that bondholder will receive – interest payment every six months and the return of principal at par value at maturity. Micro Yield Futures are more intuitive. They are quoted in yield directly. On July 22nd, August 10Y Yield Futures (10YQ2) was settled at 2.819. August 2Y Yield Futures (2YYQ2) was settled at 3.06. The 10Y-2Y spread is -0.241. The 10Y-2Y spread has been positive in recent years. It turned negative in the beginning of July as we experienced the inverted yield curve. I expect the spread to return to historic normal - a positive number, in the coming months. To trade Micro Yield futures, margins are $240 for 10Y and $330 for 2YY. A long spread can be constructed by a Long 10Y and a Short 2YY positions. The great thing about a spread trade lies with the fact that you don’t have to be right in predicting the direction of interest rates. Spread will be widened if 10Y rises faster than 2YY. Even in a falling rate environment, if 10Y fell less than 2YY, the spread will be enlarged too. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CBOT_MINI:10Y1!Long
by JimHuangChicago
1