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Ten-Year US Treasury Yield in Focus as Inflation Data LoomsTreasury Yields in the Crosshairs Ahead of High-Impact Inflation Data Due Ten-year US Treasury yields have rallied 14-basis points since Friday's swing low Bonds are selling off again as investors grow weary of mounting price pressures US10Y could snap higher if monthly inflation data due for release tops estimates Taking a quick look at a daily chart of ten-year US Treasury yields ( TVC:US10Y ) highlights a change in tone of the bond market over the last three trading sessions. The ten-year Treasury yield has climbed 14-basis points since Friday's swing low printed in the aftermath of a shockingly poor reading for headline nonfarm payrolls. After having a chance to digest April's NFP report, however, markets pegged the miss to labor shortages. After all, the NFP report showed a healthy uptick in average hourly earnings, and JOLTS data released this morning showed that US job openings are at their highest on record. This has helped reignite inflation fears and the debate around Fed tapering, which in turn, is weighing negatively on the bond market. Bond prices fall as yields rise, and vice versa. That said, the sharp reversal in Treasury bond yields on Friday left behind what appears to be a bullish engulfing candlestick. Technicians may also consider how US10Y is now trading back above its 50-day simple moving average. This could open up the door to a test of technical resistance posed by the short-term descending trendline and upper Bollinger Band near 1.65%. Eclipsing this technical obstacle might bring fresh year-to-date highs into focus. Perhaps the upcoming release of monthly inflation data on Wednesday, 12 May at 12:30 GMT will provide a fundamental catalyst to spark the move. If inflation data crosses the wires below expectations, however, we could see a boost to demand for Treasuries that pushes yields back lower.
TVC:US10Y
by RichDvorakFX
A longer term perspective on BondsThe recent sell off in the bonds has been sharp and is having reverberations throughout the broader markets. This is a monthly chart looking at bond prices going back twenty years. I was surprised to find that although the current price action has felt extreme, the bonds are still well within a 2 standard deviation regression channel. I've drawn in some possible pathways for bond prices over the next decade. While I believe there's a fairly high probability that the bottom of the regression channel around 125'00'0 will be tested and prices will eventuate toward high value areas on the volume profile, the pathways are less of a forecast and more of an illustration of questions that I have. Specifically: will the highs around 142'00'0 during the March 2020 COVID crash be tested (and possibly taken out), or will they end up being the high for the foreseeable future? If Bond prices continue to fall, when will the FED step in and apply yield curve control? Most importantly, what effects will all of this have on the broader markets? In April 2019, the Federal Reserve released a report which stated that for every 2.5 move up in the DXY, there is a 10% decline in new C&I bank loan origination. Not only do falling bond prices lead to more challenging debt environments for businesses and consumers, they can lead to a stronger dollar thus putting deflationary pressures on an economy. Needless to say, trading bond positions on a Monthly time frame isn't really viable (or exciting) for most retail traders. However, keeping these kind of macro ideas in mind help me provide a context and framework toward my own trading.
CBOT:ZN1!
by InnerMotionTrading
Under the hood of the DXYThis chart breaks the DXY down to it's individual components and examines each currency pair individually. In addition, the DXY itself is depicted as an area line at the bottom of the chart to give a more comprehensive feel for its movement. There has been a confluence of the US treasuries selling off (pushing rates higher) while the opposite is occurring in other countries. Therefore, the widening of treasury spreads between the USD and its DXY counterparts is creating an increase in demand for the dollar.
Long
by InnerMotionTrading
Weekly $TLT Most Oversold.... EVER!We are watching a capitulation of long dated bonds in real time. Today's huge gap down of -2% breaking last week's lows is actually perfectly in line with TLT seasonality for the past 16 years. This is no coincidence as the March 2009 - March 2010 sequence in bonds is very similar to the March 2020 - March 2021 sequence. The Q1 FOMC in the 3rd week is usually a catalyst to reverse the sentiment in bonds. This extra gap down near the statistical low for the *Entire Year* is a true gift. When bonds recover, expect a huge buy cycle back into beaten down tech/growth stocks. A big clue today was Gold. It tracked 30Y bonds (ZB Futures) overnight down, but reversed hard with the Euro off supports. Normally, if TLT was down -2% at the USA open gold would be crushed, but it did the exact opposite. Something is off with long dated bonds and I feel this will be quickly resolved with the FOMC catalyst next week. Join in this great trade! TLT Seasonality for the previous 16 years - There are no coincidences!
NASDAQ:TLTLong
by mortdiggiddy
85
Is inflation coming? In short, we don't think so. In the chart above, you're seeing the 10y30y spread and the 10y yield. The 10s30s is a barometer of the inflation risk premium. And quite frankly, the market isn't buying that inflation will be sustained. Yes, the 10y yield is indicating perhaps to many that there is some kind of inflation risk, but from the Macrodesiac view, all that is being exhibited here are base effects. Take a look at the US 10 year yield (the risk free rate of return) over the last 20 years, and come to a conclusion as to whether we are in an abnormal market or not. The upper bound is likely capped at 2-2.5% at the max. This would not inspire the extent of inflation that many are warning about, and the Fed is consistent with this view as well. An excerpt taken from the Macrodesiac note yesterday... 'Back in late August last year, Powell stepped up to the podium at Jackson Hole (well, it was online), where he outlined a different policy path of Average Inflation Targeting. Here's where an understanding of that above paper comes into play. " f inflation runs below 2 percent following economic downturns but never moves above 2 percent even when the economy is strong, then, over time, inflation will average less than 2 percent. Households and businesses will come to expect this result, meaning that inflation expectations would tend to move below our inflation goal and pull realized inflation down. To prevent this outcome and the adverse dynamics that could ensue, our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time." It's all about signalling. The central bank can't automatically push prices up. They can only provide behavioural signals to the market to either consume or save. That is it. The problem comes when there are broader issues at hand that might make the actual mechanism of achieving policy goals, defunct. The main one that I have been focusing on of late is of course demographics, and the labour market, which are intertwined.' Now, let's talk about those demographic issues. Below is the labour force participation rate for the US. What I would like to know is how inflation is to be sustained when we have 2% of the available workforce that have taken themselves out of even looking for work on a year on year basis? You can provide all the stimulus checks you like, but all that is doing is providing a push back to a prior baseline - if fewer people have incomes, there is less consumption, so one of the primary drivers of inflation is dampened. And with regards to the recent NFP figure of +376,000 new jobs being created in a month, we would have to see that figure be printed month on month until April 2023. Not so inspiring, is it? Your eyes may now switch to the savings rate as a critique of what I am suggesting. The problem here is that this is a ridiculously skewed measure too. For retirees and the highest income earners, they have captured most of this increase in savings. But for the poorer income quartiles, they have experienced a broader deterioration in their household savings rate. When you look at data on consumption broken down by income, you find that the highest marginal propensity to consume segment is the richest households with low liquid savings and high illiquid savings... But right now, they have both. The next highest (and is generally consistent through time) is the lowest and middle households. However, they do not have spare cash to spend! The pent up demand argument is failing, and I'd argue is more a bubble in financial media and commentators where they are on higher salaries, their family members are too and they (me too) have largely been shielded from the economic fallout of the past year. Now, I've also got into debates around something a little more concerning too, and that is to do with TIPS (Treasury Inflation-Protected Securities). You might not have heard of this, but it's effectively a way to protect yourself against the rise of inflation. I'll take another excerpt from the note written yesterday... 'There's a big problem with this measure. The Fed has been buying Treasury Inflation-Protected Securities! The Fed’s buying of TIPS could drive down TIPS yields and drive up the breakeven measure of inflation expectations. So what we are perhaps seeing here is the market using a key measure of inflation expectations to gauge the macro picture moving forwards, without actually realising that it's distorted. 'But breakevens are high!' is probably the reply that you might get back if you mention a number of factors that contend with the longer term inflation view. My question then would be to ask whether this would have some effect across the nominal yield curve, causing yields to spike higher and with greater speed, than they should? This paper might prove key to answering what's going on here. "Such expectations proxy a situation in which the public does not understand the full structure of the economy and, hence, cannot anticipate the implications of policymakers’ intention to make up for past deviations of inflation from its objective. By varying the number of economic agents (and, hence, components or blocks) in the FRB/US model who use VAR-based rather than model-consistent expectations, we can adjust the extent to which the public understands policymakers’ commitment to a makeup strategy and the degree to which aggregate economic variables react to news about the future." The paper concludes with... Makeup strategies work best when the public understands, believes, and reacts to policymakers’ commitment to offset misses in inflation from the 2 percent objective in the future.' What we are currently seeing in the market, from my point of view, is merely the Fed signalling that they want to make up for missed inflation goals over the past year and probably before as well. Now they have the fiscal support, it sounds to them like it might be the right time to do so. This is most notably seen through Powell's speech at Jackson Hole back in August where he introduced the Fed's new mandate of 'Average Inflation Targeting'. What I would wonder, specifically to do with TIPS, is whether traders know that the Fed has distorted the TIPS market, since 5y5y inflation swaps have followed it, and have almost gone in lockstep with the Fed's holdings of TIPS. This would be cause for concern, and if it is understood, alongside the waning macroeconomic indicators, then this would provide a strong basis for the current differentials in rates pricing, and for the inflation narrative to subside. Welcome normality.
TVC:US30Y
by FinkPro
129
US10Y Similarities of 2020/21 with 2008/9This study brings forward the similarities of today's price action on the U.S. Government Bonds 10YR Yield with 2008-2009 on the 1W time-frame. * In 2008, the bottom was made shortly after the Quantitative Easing 1 (QE1) was initiated in order to offset the sub-prime mortgage Crisis. In 2020 the bottom was made shortly after the 1st Stimulus packaged was initiated in order to offset the COVID-19 Crisis. * In 2009, the strong rebound that followed broke above the 1W MA50 (blue trend-line) but the MA200 (orange) held, emerging as a Resistance and eventually rejecting the price. So far today, the US10Y is way above the MA50 approaching the MA200. * That rebound formed the fastest/ strongest 1W MACD rise in more than one decade on both periods. * There is a Symmetrical Support Zone involved in both cases. * A Golden Cross and a Death Cross preceded both periods. Will history be repeated? ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** -------------------------------------------------------------------------------------------------------- !! Donations via TradingView coins also help me a great deal at posting more free trading content and signals here !! 🎉 👍 Shout-out to TradingShot's 💰 top TradingView Coin donor 💰 this week ==> alanmasters --------------------------------------------------------------------------------------------------------
TVC:US10Y
by TradingShot
10
ZenMode Snapshot: Bitcoin Fundamental/Technical AnalysisStill think the fundamentals for bitcoin are incredibly bullish: Miners: Outflows - Bearish Miners still depositing to exchanges - Bearish BTC Whales: Reserves Increasing - Bullish Transferring BTC off exchanges - Bullish Institutions: Still a narrative of corporations acquiring BTC in leu of traditional treasury assets - like treasuries Bombarded with treasury yields now indicating inflation is coming $1.9 T Stimulus I have gotten questions about why the sell off in commodities, crypto, treasuries and equities last week - and aside from technical reasons, the article sourced below from Bloomberg is a must read: "Already low short-term interest rates are set to sink further, potentially below zero, after the Treasury announced plans earlier this month to reduce the stockpile of cash it amassed at the Fed over the last year to fight the pandemic and the deep recession it caused. The move, which aims to return its cash position at the central bank to more normal levels, will flood the financial system with liquidity and complicate Powell’s effort to keep a tight grip over money market rates.” " ... a drop in short-term market rates into negative territory could prove disruptive, especially for money market funds that invest in short-dated Treasury securities. Banks may also find themselves hamstrung by effectively being forced to hold large unwanted cash balances at the central bank. The Treasury’s decision -- unveiled at its quarterly refunding announcement -- will help unleash what Credit Suisse Group AG analyst Zoltan Pozsar calls a “tsunami” of reserves into the financial system and on to the Fed’s balance sheet. Combined with the Fed’s asset purchases, that could swell reserves to about $5 trillion by the end of June, from an already lofty $3.3 trillion now." "Here’s how it works: Treasury sends out checks drawn on its general account at the Fed, which operates like the government’s checking account. When recipients deposit the funds with their bank, the bank presents the check to the Fed, which debits the Treasury’s account and credits the bank’s Fed account, otherwise known as their reserve balance." So think about this from the perspective of a financial institution, they would have to make the Treasury market holding a product with potentially negative yield - while also forced to buy insurance on the larger reserves they will need to manage. If you are a financial institution are you going to want to offer financing in the overnight market that has negative yield so a company you work with can hold Treasuries? And with the flood of Treasuries & Liquidity this also has muscled up the 5Y yield while the repo market might potentially be going negative. With the 5Y yield up now in Treasuries I am reading how the 10Y yield is comparable now to the SPY Dividend of 1.45% - and keep in mind the reduced risks in holding Treasuries. They are practically as good as gold for a corpo. 10Y Yield 10Y Bond 5Y Yield 5Y Bond So while the Federal Reserve controls the Federal Funds Rate, the Treasury Department can absolutely impact the yield in treasuries, and impact the overnight rate. This hurt risk assets, as the market now needs to price in Treasuries actually offering yields potentially worth getting into. A fascinating exchange exchange with MicroStrategy CEO Saylor talking to Bloomberg discusses thought that even now this yield is a pittance when compared to the cost of capital for companies. It is telling that a company with modest cash flow is saying that rather that investing into their operations further, and rather than giving back to shareholders, or doing share buy backs they are purchasing bitcoin as the yield on bitcoin is stunning relative to Treasuries or holding a basket of FANG stocks. Really interesting interview worth watching: www.youtube.com The key is if other executives will follow the lead of TSLA, SQ, MSTR and add Bitcoin on the balance sheet. While it may seem unconventional, keep in mind if you are a multinational corporation it is perfectly normal to have hundreds of bank accounts, like Disney, Microsoft or Facebook for example because you have vendors all over the world you will need to compensate for their services, in their currencies. Technical Snapshots: If price continues to sell off nice confluence of support with pivot points/fibonacci fan & bollingers at $40k - $40k breaks, we could hit $38k rather rapidly before I imagine buyers will be attracted Bulls will have a tough time breaking $48.5k followed by $50k . Even then, we might form a lower higher, and test support yet another time before continuing to new ATH I remain long, and am nibbling on dips, and enjoying these rips. I plan on adding to the position if we break $40k. My exit strategy will be to bail If we fall under $28k, as at that point I would have 3X'd the initial cost basis of this position. In closing, do not forget, why is the Repo market going negative, and why are 5Y yields rising? Inflation concerns. The formula for inflation is M2*V= inflation. Velocity will increase as the nation opens back up causing inflation, especially as the M2 supply is about to take on another jolt. I suspect this stimulus will pass, and I think Bitcoin is a potential lifeboat when inflation hits. Yes, we need to price in treasuries now - and yes I thought it was bonkers that the market suddenly tanks treasuries to pop yield for inflation and then - the market rotates into the dollar? So inflation is coming and the dollar rises as it did on Friday? I think I would recommend parking some wealth in the bitcoin lifeboat. Perhaps a moonshot, but this macro-narrative warrants it in my opinion. Final Quote coming from Michael Burry last week: "The US government is inviting inflation with its MMT-tinged policies. Brisk Debt/GDP, M2 increases while retail sales, PMI stage V recovery. Trillions more stimulus & re-opening to boost demand as employee and supply chain costs skyrocket." #ParadigmShift — Cassandra (@michaeljburry) February 20, 2021 Good luck traders! If you enjoy please be sure to hit the like button, and tell me what you think! Hope you all make a million! :) Keep in mind when the gold-bitcoin bears come out saying that it is too volatile, it is worth advising that even with this sell off you can still acquire an ounce of gold for only 0.038 BTC: Or 745 barrels of oil: Source: www.bloomberg.com
BITSTAMP:BTCUSDLong
by ZenMode
7
WILL YIELDS DROP? CRAZY MOVES!Hey tradomaniacs, The market is seriously playing games here! 🙈 The blast of yields can not be sustainable as this is going to be a be a thorn in Powells flesh. Why is that? Basically because rising yields will "raise the price of" debts! First of all, this is a BET against the FED and looks like TEST. As often explained, YIELDS are currently rising due to the inflation-worries. BUT here is the thing: In his last testimonial Jerome Powell said the FED is not even close to its inflation-goal of 2%❗️ So you may ask yourself, when will the YIELDS stop rising? Well there are two options: 1️⃣ Yield-Curve-Controle with Bond-Buying-Purchases 2️⃣ To back down and change the current policy Yield-Curve-Controle of long-term-yields would be an option but probably not a solution as the FED would PRINT money in order to buy bonds 👉 More inflation 👉 More worries! Will 10-Year-Yields reject off the resistance and correct? We have to keep in mind that gamblers can bet on rising yields, which will likely take some of their profits. This could cause a retracement, but fundamentally I can`t really say whether the yields will continue to rise or not. One thing is for sure: Rising yields are showing cashflow out of equities into bonds and put stocks under pressure, especially NASDAQ100 and tec-stocks. If equities fall due to rising yields then US-DOLLAR will have a lot of support to change its trend❗️ Today we have got very nice pullbacks for almost all pairs! If we see profit-saves in YIELDS, in other words a correction, then we might see again soem risk-on and great opportunities to follow the trends! Very interesting, but also a very tricky situation for Forex-traders.🙏
TVC:US05
by Trading2ez
4
Gold into Bearish TerritoryGold has been at risk of a bearish move for a number of weeks but a dollar breakout tipped it over the edge on Thursday. The dollar index formed an inverse head and shoulders in recent weeks and a break above 91 took out the neckline, which could be a bullish development in the near-term for the greenback. This is naturally bad news for the yellow metal, which had been struggling to generate much upside momentum in the first place and a move below $1,800 and the 200/233 day SMA is a further warning of tough times ahead. A break below $1,765 could see support tested around $1,750, with the next major support level below then being $1,700. We could see a pullback in the dollar after the breakout but it would take something significant to change the near-term outlook. Rising US yields have driven these moves supported by the economic data. The jobs report was a setback but it will take a lot more to cast doubt on the recovery. Especially against the backdrop of an impending massive stimulus package.
OANDA:XAUUSD
by OANDA
BROAD MARKET ANALYSIS| DXY | YIELDS & SPREADS | EMERGING MARKETSI'll try to keep this idea short with plenty of detailed charts. With the pricing in of the recent events, I think we're at a pivotal point of what happens next, based on some of the upcoming events (earnings season, Bidens' tax plan etc). Here's why... 1. It's quite obvious from the chart, that the vaccine and election news gave a boost of confidence to investors globally, reflected by the VIX currently sitting near the long-term mean ~19.5. The trading strategy that followed was a rotation into countries/sectors/factors that were underpriced due to the additional cashflow uncertainty. Essentially, a shift from min-vol into value, shift from developed into Emerging Markets, and a boost in inflation expectations as the dollar continued to weaken due to the expected EM recovery potential. However, how long will this strategy work? At some point all strategies reach of point of self-correction, mostly due to overcrowding . Let's start by analyzing US yields first. 2. As it can be observed from the US10Y chart, treasuries picked up selling momentum as the probability of Biden and a Democrats trifecta increased (also helped by FEDs comments about potential selling of long duration assets, fred.stlouisfed.org) Finally we had a breakout after these probabilities realized. Besides, here too there is a self-correcting mechanism, a threshold where yields actually become detrimental to the market. For two primary reasons: 1) Discounted cashflows at higher rates yield lower PV for equities, 2) Increasing (Re) financing costs for deeply indented companies . This threshold was ~3.25% in 2018, however the debt levels are much higher in comparison to 2018 (fred.stlouisfed.org). Of course, we can't know the threshold level until it happens, but considering the chop in the SPX while the US10Y spiked around 1.2%, this implies that the threshold is could be in the range of 1.2% to 1.5%. Considering the amount of US corporate debt that is set to retire in 2021, the sensitivity of US equities to T-yields is something to be carefully watched. Although, knowing that the FED could easily go the Japanese path of YC control, high yields shouldn't cause an enormous sellout, perhaps at most ~-10%-15%. 3. Lastly, the dollar weakness has been one of the drivers behind equities returns globally. Except for the EU, a weak dollar is beneficial to practically all economies. However, considering the increasing amounts of net short dollar positions, the dollar bears had it coming, judging by the short squeeze last week. On a longer time frame, the dollar is near a structural support, implying that the dollar will trade horizontally with a potential upside. Dollar strength should slow down or even put a break on future EM rallies. However, if the dollar continues to weaken backed up by the fiscal and monetary stances, this will furthermore increase the reflation potential for the US. Therein, comes a risk of too high inflation, where the FED would have to step in, where even a single rate hike could turn the leveraged loans market to shreds. Although, judging from the muted reaction in the short end of the yield curve, the market doesn't think that any inflation surprise would force FEDs hawkish hands. Finally, what's not priced in? Firstly, it's hard to say how much Bidens' Tax plan is priced in, but what's certain is that in any case it will dampen the growth in corporate earnings. Considering that currently equities are far above the long term means in the PE and CAPE ratios the question is what are the chances that the multiples will keep expanding for the market to yield similar returns to the last 5-10 years? Likewise, this earnings season we should get a glimpse at the potential of recovery for small caps and value stocks, to see whether the market is overextended or the bullish expectations were rightly priced in. There many other potential quantitative factors to analyze, for now this is it for the broad market analysis. - Step_ahead_ofthemarket ________________________________________________________________________________________ >>I do not share my ideas for the likes or the views. This channel is only dedicated to well-informed research and other noteworthy and interesting market stories.>> However, if you'd like to support me and get informed in the greatest of details , every thumbs up and follow is greatly appreciated! Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
SP:SPX
by step_ahead_ofthemarket
(DXY) What Really Is Driving Gold (Yields)There is much speculation across the investor universe about what influences Gold prices and vice versa. Today I will be focusing on the false theory that Gold prices lead treasury yields and that by extension, Gold signals market crashes. The Financial Solar System Taking a look at the chart it is clear that sometimes Gold prices parallel and slightly lead treasury yields. However, if we overlay the Dollar index it is astronomically clear that the only times that Gold does this is when the Dollar's gravitational pull temporarily alters Gold's trajectory. Gold prices at the root are inversely corelated with Treasury yields. It is really that simple. The Treasury market is the Sun while Gold, the Dollar, and the Stock market are planets. As treasury yields ultimately dominate and inversely lead Gold prices, the Dollar acts as a secondary force. Yields are the only pre-signal for Market crashes and it looks to me like another leg down is imminent. However, it also looks like the dollar is setting up for a relief rally which means Gold would plummet along side stocks before the Sun sling shots it to new highs.
TVC:GOLD
by trade-God
1