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US10Y

US10Y going lower as Fed has no choice but to continue cutting.More than 1 year ago (November 7 2023, see chart below), we made a bold (for the time being) call on the U.S. Government Bonds 10YR Yield (US10Y), as against the prevailing market sentiment we gave a sell signal, right after what turned out to be a top: Today we revisit this pattern, following yesterday's Rate Cut by the Fed primarily because of their statements that instead of 4, they will only proceed to 2 more cuts in 2025. We believe this to be false and expect the Fed to quickly resume the previous outlook. The chart shows that the 1M RSI Lower Highs have are consistent with the previous Bearish Reversal on the US10Y price, similar to 2006 - 2007. We are expecting to hit the 0.382 Fibonacci retracement level at 2.100%, as the Fed's Cut Cycle will be accelerated in order to meet within 12-18 months their 2% inflation target and stabilize. For better illustration we have plotted also the U.S. Interest Rate (red trend-line), where you can clearly see that the fractal we compare to today, is right before cuts started in August 2007. Also it is a natural consequence for the US10Y to fall when rate cut cycles start, evident also in June 2019, December 2000, May 1995, May 1989 September 1984, May 1981 etc. ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support us, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
TVC:US10YShort
by TradingShot
12
US 10Y TREASURY: expecting a 25 bps cutAs the Feds December meeting is approaching, so the market nervousness is increasing. During the previous week the 10Y US benchmark reverted back toward the 4,4% level, from 4,2% traded previously. Such a move was a reflection of market expectations that the Fed will cut interest rates by additional 25 bps on December 18th. Also, ahead of the FOMC meeting, November inflation data was published, showing 0,4% increase in November, higher from market expectation of 0,2%. Increased volatility might be expected also during the first two days of the week ahead. The current 4,4% level for 10Y US Treasuries might be its highest level for the week. As per CME FedWatch Tool, there is currently 97% odds that the Fed will cut by 25 bps. In this sense, some relaxation in yields might be expected during the week ahead.
TVC:US10Y
by XBTFX
SPX × US10Y: A Signal for Market Tops and Economic Shifts1. Combining Equity Levels and Yield Sensitivity SPX (S&P 500) reflects equity market strength and investor sentiment. When SPX is rising, it typically indicates optimism or strong earnings growth expectations. US10Y (10-year Treasury yield) reflects the cost of capital and inflation expectations. Rising yields can signify tightening financial conditions or economic overheating. When you multiply these two metrics, the product magnifies the impact of simultaneous market exuberance (high SPX) and rising yields (high US10Y). A very high SPX × US10Y value could indicate a market environment where valuations are stretched, and higher yields are increasing the cost of capital—often a precursor to market corrections. 2. Historical Patterns In prior market tops, both equity valuations (SPX) and yields (US10Y) often peak together before significant corrections: Dot-Com Bubble (2000): SPX was highly elevated, and rising yields signaled an end to loose monetary conditions. 2007-2008 Financial Crisis: SPX was at record highs, and US10Y yields were climbing, reflecting tighter monetary policy. 2021-2022 Post-Pandemic: SPX hit record highs, and yields started to rise sharply as inflation surged, leading to a market correction. The SPX × US10Y value tends to peak during these moments, providing a warning signal of market excess. If you are using the SPX × US10Y (multiplication) instead of division, it can still serve as a market indicator, though the mechanics are slightly different. Here’s why the product of the S&P 500 and the 10-year Treasury yield (SPX × US10Y) might be relevant for predicting market tops: 3. Economic Logic Behind the Indicator A. Reflects Cost of Capital Rising US10Y yields increase the discount rate used to value stocks. High SPX × US10Y suggests equities are vulnerable to revaluation if yields continue to rise. B. Overheating Economy High SPX × US10Y often coincides with an overheating economy, where inflation pressures push yields higher, while equities are driven by optimism. This imbalance can quickly reverse if monetary tightening occurs. C. Peak Growth Phase A peak in the SPX × US10Y value might signal the economy is at the late stage of the business cycle, where growth slows, and equities face headwinds. 4. Why It May Predict Market Tops Valuation Excess: A high SPX × US10Y product reflects elevated valuations combined with tightening financial conditions. Transition to Risk-Off Environment: Rising yields make bonds more attractive relative to stocks, potentially triggering equity outflows. Fed Policy Influence: If yields are rising due to Federal Reserve tightening, equity markets often react negatively as borrowing costs rise and liquidity is withdrawn.
SP:SPX
by ILuminosity
US10Y - Elliott Wave AnalysisNot sure if this will happen but if it does, what does it mean ? 1. Impact on the US Dollar Strengthens the Dollar: Higher yields attract foreign investors seeking better returns, increasing demand for the US Dollar. Rising yields often coincide with expectations of tighter monetary policy by the Federal Reserve, which further boosts the dollar. 2. Impact on Gold Negative for Gold: Gold is a non-yielding asset, meaning it doesn’t pay interest or dividends. When bond yields rise, the opportunity cost of holding gold increases, making it less attractive. A rising US Dollar (driven by higher yields) also makes gold more expensive in other currencies, reducing global demand. Inflation Hedge Caveat: If rising yields are driven by inflation concerns, gold might still see some demand as a hedge, although its gains are often capped by rising yields. 3. Impact on the Stock Market General Impact: Rising yields increase borrowing costs for companies, reducing profits and potentially slowing down growth. Investors may rotate out of riskier assets like equities into safer Treasuries as yields become more attractive. Value vs. Growth: Value Stocks (e.g., banks, industrials): These may benefit from rising yields as they’re tied to economic growth and inflation expectations. Growth Stocks (e.g., tech companies): These tend to underperform because their valuations depend on future cash flows, which are discounted more heavily as yields rise. 4. Impact on Nasdaq (Tech Stocks) Negative Impact: The Nasdaq is heavily weighted toward growth and tech stocks, which are sensitive to rising yields. Higher yields increase the discount rate used to value future earnings, making high-valuation tech stocks less appealing. Example: Periods of sharply rising yields often coincide with sell-offs in the Nasdaq. 5. Impact on Emerging Markets Outflows from Emerging Markets: Rising US yields can draw capital away from emerging markets as investors seek safer and higher-yielding US assets. This can weaken emerging market currencies and lead to tighter financial conditions in those economies. 6. Broader Market Sentiment Inflation Expectations: Rising yields driven by inflation concerns can create volatility across all asset classes. Fed Policy Sensitivity: Markets may react negatively if higher yields signal faster-than-expected Fed rate hikes. Historical Context Periods of sharply rising yields (e.g., during taper tantrums or inflation scares) have often led to stronger US dollars, weaker gold prices, and volatile stock markets, with the Nasdaq typically underperforming due to its tech-heavy composition.
TVC:US10YLong
by tigo2020
2
US 10Y TREASURY: inflation data aheadThe NFP data were in the center of market attention during the previous week. Analysts perceived posted data as “not too hot and not too cold”. Indeed, they were somewhere in between. The US economy added 227K new jobs, which was higher from market estimate, but at the same time the unemployment rate reached 4,2%, a modest increase from 4,1% posted previously. Regardless of these mixed data, CME FedWatch Tool is showing 85% odds for a 25 bps rate cut in December. It should be taken into account that the US inflation data is set to be released during the week ahead, which will bring another layer to market expectations. The 10Y US Treasury benchmark yields were traded to the downside during the previous week. For the second week in a row yields are gradually taking the down course. During the previous week, the 10Y benchmark was closed at the level of 4,17%. Next week, the US November inflation data will be posted, however, investors are currently positioning for the FOMC meeting, scheduled for December 17-18th.
TVC:US10Y
by XBTFX
BTC/EUR. Eyeballing across the €100'000 roofBitcoin robustly pumped to $100,000 and above for the first time on Wednesday, December 4, 2024 surging to a new record after President-elect Donald Trump unveiled administration picks seen as holding the keys to ushering in crypto-friendly policies when he takes office in January. Chief among the picks is Paul Atkins, whom Trump intends to nominate to lead the Securities and Exchange Commission (SEC), which regulates cryptocurrency. Atkins, know in social media as a crypto advocate and former SEC commissioner, is expected to regulate cryptocurrency with a lighter touch than Gary Gensler, who leads the commission under the Biden administration. Gensler, who aggressively fought the industry’s expansion in the US, is set to resign on Inauguration Day. Bitcoin touched $100,000 just hours after Atkins was announced as Trump’s choice for SEC chair. This is all right with the new milestone (counted in greenback), built on the stunning rally since Trump won the presidency throne on November 6, which fueled a $6,000 one-day spike in bitcoin that brought it to a new record above $74,000. A week later, it hit $90,000. By the way.. The main technical graph for BTC/EUR COINBASE:BTCEUR says €100'000 milestone has not been passed through yet to this time. While talks are talking, last exam is not passed yet. Macro data still stoke fears over a possible recession and the notion that the Federal Reserve could be too slow with cutting interest rates. Non-farm payroll added just 12K new places last month. Fresh labor market data is on the radars on Friday, Dec 06 (+202K non-farm payroll forecasted). Sure, there is "no guarantee", though.. until last exam is not passed yet. In case of success only, we can talk about further growth towards 150 thousand euros.
by Pandorra
US10Y: Hit the 1D MA50. See how to trade if it breaks.The U.S. Government Bonds 10 YR Yield has turned bearish on its 1D technical outlook (RSI = 42.524, MACD = 0.005, ADX = 44.101) and since last Friday it has been trading on the 1D MA50. That was the first test of this trendline in 2 months and even though yesterday's candle closed under it, we don't have a decisive breakout yet. A candle considerably below it, should test the 1D MA100. This is part of the larger Channel Down and a crossing under the 1D MA100 validates that this is the new bearish wave. The 1D RSI already is inside a mirror Channel Down pattern as April 15th-May 15th. Our perspective is long term bearish in any case but if the 1D MA100 holds, you may trade within the Channel Down and the circles for short term buy and sell entries. Our long term target is raised a little higher on the 1.1 Fibonacci extension (TP = 3.500%). See how our prior idea has worked out: ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
TVC:US10YShort
by InvestingScope
Perhaps a 'Santa Rally' is just one step away to begin in 2024Stock markets often enjoy a seasonal share boost during the festive period. It's been two unpredictable year for stock markets after gloomy 2022 but all we are, traders, investors, TradingViewers are hoping for a successful end-of-year boost in the form of a so-called Santa rally. Shares have much wide, breather and better performance so far in 2024, amid trade and geopolitical tensions, high inflation and high interest rate. So... while children are compiling their Christmas lists, traders also want some sweet candies. Traditionally, festive cheer and holiday household spending make the markets more optimistic during the holiday season, boosting investor portfolios. But will 2024 follow the trend? The "Santa rally", a term coined in 1972 by Yale Hirsch, the founder of the Stock Trader’s Almanac, "describes a tendency for the stock market to go up by 1% to 2%" over final five trading days of the outgoing year and the first two of the new one, said Forbes Advisor . This period has "historically" shown higher stock prices in the S&P 500 SP:SPX 79.2% of the time, says Investopedia . What drives the Santa rally? Reasons for the Santa rally are vary and one explanation is the cheery "end of year mood" that means investors are in more of a "buying temperament" rather than selling shares, which pushes up stock prices Will there be a Santa rally this year? Probably, Yes. September quarter capped off the best 12-months return (+36.36%) for S&P500 Index since the pandemic stock market recovery in 2020, so there are a lot of hopes that stars will align, and momentum in the markets, helped by declining U.S. interest rate, will push prices higher in the run-up to Christmas. Sure, there is "no guarantee", though. Sometimes it happens. Sometimes it is not. The odds of a Santa rally may be in your favor, but the "best option" (author's opinion) is to do nothing, remain invested and be "pleasantly surprised" by another strong month by the new year. The main technical graph for S&P500 Index says that we right now.. already somewhere above to 6'000 points for SPX Index, and just one step to break it out to reach the next one half-a-mile, i.e. 6'500 points by the end of the year. Just follow the major upside trend, that's been taken earlier this summer. And that is all. Merry Christmas y'all, TradingViewers! See you in a Happy New 2025 Year! 💖💖
FOREXCOM:SPX500
by Pandorra
3
US 10Y TREASURY: NFP on scheduleRegardless of a Thanksgiving Holiday in the US, during the previous week the 10Y US Treasury yields slides back till the levels from October this year. The yields started the week around the level of 4,42% while they are ending the week at 4,17%. Feds favourite inflation gauge, the PCE Price Index was released early in the week, which was in line with market expectations. On the other hand, FOMC November meeting minutes were released suggesting a Feds members conclusion that in case of further inflation relaxation and labour data in line with their expectations, there will be a case for further rate cuts. At this moment, the CME FedWatch Tool suggests 66% odds that the Fed might cut interest rates by another 25 basis points at their December meeting. The US Treasury yields reacted to these expectations. As per current sentiment, there is still space for a further drop in yields, at least until the market properly tests the 4,0% level. It should be considered that Non-farm Payrolls are scheduled to be released in a week ahead, in which sense, some volatility might follow the US yields.
TVC:US10Y
by XBTFX
1
Arabica Coffee Futures. The Canary in the Coal MineWith nearly 60 percent up path performance in 2024, Arabica coffee futures rose above $3.00 a pound, the highest mark since May 2011, as traders assess potential problems with next year’s crop in top producer - Brazil. Despite recent rains, soil moisture levels remain low, leading to limited fruit development and excessive leaf growth, local traders said. U.S. and European coffee lovers are getting ready to tighten their belts as natural disasters have hit the world’s two largest coffee-producing countries, causing commodity prices to more than double in the past five years. Droughts in Brazil, the world’s largest coffee producer, and severe typhoons in Vietnam, the second-largest producer, have severely disrupted the global coffee supply chain, driving up production costs that are increasingly being passed on to consumers. In addition, there are reports that Brazilian coffee farmers are holding back shipments of coffee to the market in hopes of higher prices, leading to further shortages, tighter supplies of coffee on the spot market, and higher prices. Coffee is literally the “Canary in the coal mine,” signaling climate change, the ecological crisis, and its impact on agriculture. The idiom originated within the Industrial Revolution in England (back to late XVIII century), when coal miners, lacking modern gas-monitoring equipment, would take canaries (birds) into the coal mine with them. And when dangerous gases like carbon monoxide (which is odorless) accumulated in excess in the mine, they stopped the birds chirping and killed the canaries before killing the miners, thus providing a warning to leave the tunnels immediately. As some of the world’s largest coffee-consuming regions, coffee lovers in the United States and Europe will find the price hikes particularly hard to stomach. According to German consumer data company Statista, Europeans consume about 3.2 million tons of coffee a year, accounting for nearly 33 percent of the world’s total coffee consumption, while Americans drink 400 million cups of coffee daily (which equates to 146 billion cups of coffee consumed in the United States each year, or nearly four cups a day for every American adult). In fact, coffee is more than just a morning ritual in the United States; it has become a cultural and business driver. But understanding the depth of America’s love affair with coffee may be as complex as the drink itself, and of course, more complex than the current coffee prices. Natural disasters have taken a heavy toll. Brazil, which accounts for about 40% of the world’s coffee production, is battling one of its worst droughts in decades. Dry conditions have severely impacted Arabica-growing regions, reducing yields. The 2023–24 crop cycle is already seeing a sharp drop in production, with some estimates suggesting output could fall by as much as a fifth (20%). The impact is being felt most acutely in Minas Gerais, Brazil’s largest coffee-producing state and home to high-quality Arabica, which has seen months of lower-than-normal rainfall. Brazil’s farmers are battling the country’s worst drought in seven decades and above-average temperatures. While Brazil dominates the Arabica market, Vietnam is the world’s leading producer of the cheaper Robusta beans used in instant coffee. Earlier this fall, Typhoon Yagi devastated the country’s main coffee-growing regions in the Central Highlands, killing at least 60 people and injuring hundreds more. Thousands of hectares of coffee plantations were estimated to have been damaged, leading to significant losses in both the current crop and future production potential, as the damaged trees will take years to recover. A perfect storm of environmental concerns has driven prices to all-time highs, above US$3.00 per pound of coffee beans. The combined impact of drought in Brazil and the typhoon in Vietnam has sent global coffee prices soaring. The International Coffee Organization (ICO), an intergovernmental body made up of coffee-exporting and -importing countries, reported that prices rose nearly 20% in the third quarter of 2024, reaching their highest level in nearly a decade. The ongoing effects of climate change make a quick return to stability difficult. The sector remains vulnerable to extreme weather conditions, which could further disrupt future harvests. In addition, growing global demand, particularly in emerging markets such as Asia, could continue to put upward pressure on prices, further slowing recovery efforts. As the world’s two largest coffee producers struggle to recover from the crisis, the outlook for the global coffee market remains uncertain. Climate change is reducing the area of ​​land suitable for growing coffee crops, and extreme weather events are becoming more frequent, creating a range of challenges for the sector and coffee drinkers in the US and Europe. In technical terms, the main 12-month graph of coffee prices indicates another buyers attempt to storm the round, 250-cent mark. Since the price is near to consolidate by the end of the year above this round number, it can contribute to a further rally and multiple price growth in the foreseeable future.
ICEUS:KC1!
by Pandorra
1
U.S. Aggregate T-Bond Market. Fears & Greed Awakening. Series IIIt's gone 3 weeks or so, since Mr. Trump has secured a win over his Democrat-rival Kamala Harris in the 2024 U.S. presidential election, as it declared by the Associated Press. Since that, a lot of stocks soared in a meme-style mode, while Bitcoin almost cleared $100,000 and Dogecoin soared amid Trump-fueled crypto rally. However macro data still stoke fears over a possible recession and the notion that the Federal Reserve could be too slow with cutting interest rates. Non-farm payroll added just 12K new places last month. And the ISM manufacturing index, a barometer of factory activity in the U.S., came in at 46.5%, worse than expected and a signal of economic contraction. Fresh ISM release is scheduled on Dec 02, 2024 (47.5 points forecasted), and labor market data is on the radars on Friday, Dec 06 (+183K non-farm payroll forecasted). The main technical graph is for U.S. Core Aggregate T-Bond Market ETF (AGG), in total return format, and it indicates on Reversed Head-and-Shoulders technical structure in development, as it's been discussed in earlier published ideas. Moreover, huge 200-Week SMA breakthrough is on the investments radars also. What does it mean for Bond Market?.. Potentially "Good", to jump to all-time high. ... and for Stock Market?.. Potentially "Also Good", until it reach the fever pitch.
AMEX:AGG
by Pandorra
US 10Y TREASURY: watch for October PCEPrevious week markets spent on digesting currently mixed economic data as well as statements from a few Fed officials. The most important question at the moment is whether the Fed will cut interest rates at December's FOMC meeting or not. Statements of two Fed officials were rather mixed. On one side, Chicago Fed President Goolsbee noted his view on a need for more rate cuts, but the pace of it should not be speeded up. On the other side is Fed Governor Bowman, who stated that the fight against inflation “appears to have stalled”. The week ahead is important for markets, as October PCE data are set for a release, in which sense, might provide some clearer picture to markets of a potential next Fed move. At the current moment there are only 35% odds that the Fed will cut rates by 25% in December. The 10Y US Treasuries were traded in a relatively mixed manner, exposing market uncertainty over the potential Feds move. The yields started the week around the level of 4,48% and for the rest of the week was oscillating around the 4,4% level. Further relaxation might continue during the week ahead, in case that the October PCE is in line with the current market expectations. In case that there are some deviations, then the yields might return toward the 4,5%. However, the most probable scenario is further relaxation of yields, at least to the level of 4,3%.
TVC:US10Y
by XBTFX
1
US 10Y TREASURY: Fed is not in hurryPrevious week on the US Treasury bond market was marked with Fed Chair Powell's comment that the Fed is “not in a hurry to lower interest rates”. The note came from Feds perception of a strong US growth, in which sense, there is no need to cut interest rates too soon. This marked investors confidence, so 10Y Treasury yields continued their path toward the upside. The highest weekly level reached was 4,49% at one point, however, yields are ending the week at 4,44%. It will take some time until the markets digest the mentioned note from Fed Chair Powell. Now the question is whether the Fed will cut interest rates at their December's meeting, or the rate cut will be postponed for next year. As per CME FedWatch Tool, the market is expecting with a 62% odds, that the Fed will cut in December by 25bps, while the rest is of opinion that the Fed will keep rates unchanged. This digesting might bring some volatility back on the market, where yields might move between 4,5% and 4,4% during the week ahead.
TVC:US10Y
by XBTFX
US10Y 1D RSI Bearish Divergence signals a long-term sell.The U.S. Government Bonds 10YR Yield (US10Y) has been trading within a Channel Down pattern since the December 27 2023 Low. The price is above both the 1D MA50 (blue trend-line) and the 1D MA200 (orange trend-line) and is approaching the patterns top. The 1D RSI is already making a bearish reversal though, having posted Lower Highs against the price's Higher Highs, which technically is a Bearish Divergence. As a result, we expect the Bullish Leg to top soon and then reverse to the Channel's new Bearish Leg. The previous one made a Lower Low at the bottom of the pattern on the 1.2 Fibonacci extension level and as a result our Target is just above it at 3.500%. ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support us, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
TVC:US10YShort
by TradingShot
3
The Best Explanation of The Bond Market You're Ever Gonna Get12 Month US10Y Bollinger Bands between 2.5 and 2.9 Standard Deviations away from a moving average model greater than 4 years in length, preferably exponential. I haven't optimized this to perfection, but it's close enough to give you the basic idea. The bond market is just a simple oscillator emerging from a complex system and simply does what every other very large and complex system does. It has a trend around which it travels but in decades and centuries not years. It isn't complicated, but it is extremely slow. There are 2 phases and a 5,000 year long trend. It goes up. It goes down. Over the course of centuries it declines. In the down phase, it stays below trend and does the exact opposite in the opposite phase. A kindergartener can trade this thing. Currently the phase is turning over from a down phase that lasted from 1980 to 2020, and entering into a new up phase that will most likely last for 3-4 decades. Trading it: buy secondary market long duration government bonds at the bond yield 3 standard deviation line and sell at the trend. Repeat for the next 30-40 years. Easy peasy.
TVC:US10YShort
by MarkLefevre
2
Trump Presidency Ignites Bond Yields on Inflation ExpectationsThe “Make America Great Again” ethos has set the greenback on fire. Donald Trump's re-election has the US dollar surging 2%, extending its rally since early October to a total gain of 5%. This resurgence is despite the anticipated 25 basis points (“bps”) rate cut at the November FOMC meeting. Dollar rally is driven by expectations of potential policy changes by the Trump Presidency. HIGHER INFLATION EXPECTATIONS UNDER TRUMP 2.0 Trump’s election victory, combined with the Republican sweep of the Senate and the House of Representatives, gives the party the leverage to enact swift and substantial legislative changes. His policies, such as corporate-friendly tax cuts & light-touch regulations, are expected to amplify corporate growth. These policies, combined with import tariff imposition, are expected to drive inflation higher. Rising inflation will curtail the pace of rate cuts by the Fed. Rate cut expectations have eased since election. On November 6 (election day), projections pointed to rates reaching 350-375 bps on election day (6/Nov) per CME FedWatch tool. Now, they are expected to reach 375-400 bps. Trump has previously pushed the Fed towards accommodative rate environment. Fed Chair Powell re-iterated that the Fed remains independent and data driven. Source: CME FedWatch Trump's proposed tariff policy will further strengthen the dollar. In August 2023, Trump announced plans for a universal 10% tariff on all U.S. imports, reiterating that tariffs on Chinese goods could be even higher, potentially reaching 60%-100%. Such tariffs are expected to drive inflation higher. It will raise consumer prices and provoke retaliatory actions from trading partners, worsening inflation. Trump aims for these tariffs to revitalize American manufacturing and reduce reliance on imports which collectively support a stronger dollar. STRONGER DOLLAR TRIGGER BOND YIELD SURGE The resurgent dollar has contributed to the sharp rally in bond yields. The yield rally since October has resulted in the 10Y yield rising by 60 bps. Yields initially surged after the election result but partially reversed the following day after the FOMC meeting. It currently stands 5 bps higher than the pre-election level. Unlike the yield, the yield spread has remained flat since October. Higher for longer rates act to push this spread lower. The Federal Reserve reaffirmed (at its Nov meeting) its dovish tone as Powell pointed to signs of an easing job market and slowing inflation. However, its impact on curbing bond yields was limited. According to a JP Morgan report , while Fed Chair Powell has consistently conveyed a dovish tone over the years, the Fed's actual decisions have often skewed hawkish. Although Powell’s dovish statements have initially brought bond yields down, the hawkish policy actions and Fed’s wait and watch approach that followed have typically led to renewed yield increases. This explains why yields continue to rise despite Powell’s dovish remarks at the November meeting. HYPOTHETICAL TRADE SETUP Treasury bond yields have been on the rise since October and Trump’s win has supercharged the rally. Investors are expecting higher inflation due to Republican policies which favour corporate growth. Import tariff, if enacted, would have an even larger impact on the dollar and bond yields. However, actual policy plans remain uncertain for now. While yields initially surged after the elections, they partially reversed shortly after as the Fed signalled a dovish stance. Despite this, the 10Y-2Y yield spread has remained unchanged. Resurgent inflation will lead to the Fed slowing the pace of rate cuts. The recent reversal in yield spreads may be unsustainable given the expectation for slower rate cuts. When Trump administration announces policy plans, yields could surge even more strongly. This week’s CPI release is anticipated to influence bond market movements. Analysts expect October’s YoY inflation to remain steady at 2.4%. If inflation holds at this level, it may have minimal impact, aligning with the Fed’s "watch and wait" strategy. However, a sharper-than-expected drop in inflation could reinforce expectations of quicker Fed rate cuts. With the impact of inflation most apparent on the longer-tenor yields, investors can focus the position on the 10Y-2Y spread. CME Yield Futures are quoted directly in yield with a 1 basis-point change representing USD 10 in one lot of Yield Future contract. This simplifies spread calculations with a 1 bps change in spread representing profit & loss of USD 10. The individual margin requirements for 2Y and 10Y Yield futures are USD 330 and USD 320, respectively. However, with CME Group’s 50% margin offset for the spread, the required margin drops to USD 325 as of 12/Nov, making this trade even more capital efficient. A hypothetical long position on the CME 10Y yield futures and a short position on the 2Y yield futures offers a reward to risk ratio of 1.3x is described below. Entry: 6.2 basis points Target: -11.5 basis points Stop Loss: 20 basis points Profit at Target: USD 177 ((6.2 - (-11.5)) x 10) Loss at Stop: USD 138 ((6.2 - 20) x 10) Reward to Risk: 1.3x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme . DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CBOT_MINI:10Y1!Short
by mintdotfinance
US 10Y TREASURY: still digestingIt was an interesting week for US Treasury bonds. Although markets went into hype after the election of Donald Trump as the next President of the US, the 10Y Treasury yields remained out of this scope. Their exclusive focus was on the FOMC meeting and Fed’s next move. As expected, the Fed cut interest rates by another 25 bps, with a solid overview of the US economy at this moment. The 10Y Treasury benchmark reached its highest weekly level at 4,47%, after which some relaxation came, down to the level of 4,30%. Markets will use the week ahead to digest currently available data. The Fed has another FOMC meeting scheduled in December. Markets are expecting, with currently 75% odds that the Fed will make another rate cut by 25 bps. In line with this sentiment, it could be expected that 10Y Treasury yields will continue with a relaxation. However, some volatility might also be expected, where the yields might shortly turn to the upside, testing levels modestly above current 4,3% level, before they make a move toward the 4,2% level.
TVC:US10Y
by XBTFX