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Treasuries

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
A "surge" in yieldsWord on the street is that real rates are surging. SURGING, I tell you!! The financial press gets caught up in the moment, swept along in the excitement, elation, and fear of any directional market move. During such times, it is especially valuable to step back, look at the bigger picture, and ascertain if the long-term prevailing trend is at risk of a breakout or reversal. Take the US 10-year yield: Looking at a monthly chart, we see 40 years of a very clear downward trend. That "surge"? Well, look for yourself. Barring something as extreme as China throwing a firesale on US paper, I expect this trend to continue for quite a while longer. There is a lower bound to yields, but that bound is continually being pushed lower as rates are cut, other central banks foray into negative rates, and investors/funds begin seeking the 'least-worst' store of value. This demand shift pushing the lower bound lower is what has formed the lower bound of the downward trend channel on the chart. I'm dubious about this 'reflation trade' story: The search for yield, and even simply 'least-worst' store of value is the prevailing force in this market. US treasury yields can only outperform so far in the broader market of debt instruments before they attract more buyers. Negative rates in other nations have intensified this effect. This behavior forms the upper bound of our downward trend channel. Perhaps we'll see by the end of December if this "surge" is an actual SURGE. For myself, I will be respecting the strength of this 40 year trend, and expecting any strong upward move in yields to only tag the upper bound of the channel, (if even that far), before reversing to the downside.
TVC:US10Y
by iamroot
3
Investors are bullish on US TreasuriesThe tide in the $20 trillion Treasury market appears to be turning in favor of the bulls for now, with expectations growing that the Fed will boost purchases of longer-maturity debt as soon as next month after Mnuchin requested the FED to return the money set aside for lending programs in the US. This implies we could see a weak US Dollar moving forward. However the pandemic situation could keep investors uneasy for now. A September 2020 pivot Low stands between the currency's next level of major support zone at 88.2xx. I'll take this play from a Commodities and Emerging Markets currencies perspective. Silver is an interesting precious metal that could see this year's pivot high breached to the upside with a $34.xx being a possible target 🎯 for 2021. The USDSGD is in play to breach a storng level of support that held the price twice in both January 2019 and January 2020. If the monthly candle closes below this area, it's next support 🎯 will be around the 1.30xx - 1.31xx supply area.
NASDAQ:TLTLong
by GrizzlyBearBee
Bond Yields point to recession....or this time it's different?The 10y-2y bond yields are important because it is the long-short of market expectations; that is, how people view the near-term market vs. their perceived evolution of the market (that also anticipates the FOMC's likely reaction. It's several signals in one). The 10y2ys (blue) is the 10 year Treasury constant maturity (now at 0.96%) Minus the 2-Year Treasury constant maturity (now at 0.19%). The higher the number (and greater the difference), the more people value long-term certainty over the short-term unknown. Currently, the 10y-2y is at 0.8 and rising which last happened in December 2007, April 2001, December 1990, July 1986, October 1971... you get it. It's a reliable indicator, and in the past, a negative 10-2 spread has predicted every recession from 1955 to 2018 (SOURCE) , but has occurred 6-24 months before the recession occurring. The last time it went negative was in August 2019. THE ANALYSIS Notice that we're approaching a golden cross (yellow 50ema crossing the white 200ema). The last time this happened was January 2008, and May 2001. I've overlaid the S&P- you can see it's crashed. So is this a new paradigm of monetary policy? Or does nothing change? Is this time really different? Here's the historical US Yield Curve source. MORE ABOUT THE YIELD CURVE Bond prices and yields move inversely of each other. When bond prices go up yields go down, and vice versa. The reason that lower yields in the long term are a indicator for the economy is because longer term bonds are seen as safe investments meant for preserving wealth; while stocks, forex, and derivatives are riskier and used for growing wealth. When investors have a good outlook on the economy, they will sell their long term bonds and put that money into the riskier investments listed above. This flight from longer term bonds to riskier investments causes demand for the longer term bonds to fall, causing bond prices to fall ,and yields to increase. In times of bad economic outlook, people will start moving their money from stocks into the longer term bonds as a way to protect themselves from potential future downturns. This flight from stocks to longer term bonds causes demand to increase, causing bond prices to increase, and yields to go down. The change in bond yields is based on bond price, which is based on supply and demand. HISTORICAL CONTEXT: The 10-2 spread reached a high of 2.91% in 2011, and went as low as -2.41% in 1980. During recession, central banks lower rates pushing down the i.r. curve. When the spread starts contracting, market expects a coming cut of the i.r. and a future lower curve. For this reason, real world curves (vs academic ones) are decreasing on the long terms: a kind of economic cycle is implied. You may also read the spread under a credit risk point of view: a tight spread means "if an issuer can survive 2y, it is very likely that it will survive also 10y therefore a small extra premium is required". This is very clean in distressed bond issuers: implied yields usually form a reversed term structured (decreasing like an hyperbola). See more:
TVC:US10YShort
by TMoneyBidness
2
Bond Yields point to recession....or this time it's different?The 10y-2y bond yields are important because it is the long-short of market expectations; that is, how people view the near-term market vs. their perceived evolution of the market (that also anticipates the FOMC's likely reaction. It's several signals in one). The 10y2ys (blue) is the 10 year Treasury constant maturity (now at 0.96%) Minus the 2-Year Treasury constant maturity (now at 0.19%). When the spread increases, it means there's falling demand for long-term Treasury bonds, which means investors prefer higher risk, higher reward investments. Investors think interest rates will now rise in the short term. Currently, the 10y-2y is at 0.8 and rising which last happened in December 2007, April 2001, December 1990, July 1986, October 1971... you get it. It's a reliable indicator, and in the past, a negative 10-2 spread has predicted every recession from 1955 to 2018 (SOURCE), but has occurred 6-24 months before the recession occurring. The last time it went negative was in August 2019. THE ANALYSIS Notice that we're approaching a golden cross (yellow 50ema crossing the white 200ema). The last time this happened was January 2008, and May 2001. I've overlaid the S&P- you can see it's crashed. So is this a new paradigm of monetary policy? Or does nothing change? Is this time really different? Here's the historical US Yield Curve source. MORE ABOUT THE YIELD CURVE Bond prices and yields move inversely of each other. When bond prices go up yields go down, and vice versa. The reason that lower yields in the long term are a indicator for the economy is because longer term bonds are seen as safe investments meant for preserving wealth; while stocks, forex, and derivatives are riskier and used for growing wealth. When investors have a good outlook on the economy, they will sell their long term bonds and put that money into the riskier investments listed above. This flight from longer term bonds to riskier investments causes demand for the longer term bonds to fall, causing bond prices to fall ,and yields to increase. In times of bad economic outlook, people will start moving their money from stocks into the longer term bonds as a way to protect themselves from potential future downturns. This flight from stocks to longer term bonds causes demand to increase, causing bond prices to increase, and yields to go down. The change in bond yields is based on bond price, which is based on supply and demand . HISTORICAL CONTEXT: The 10-2 spread reached a high of 2.91% in 2011, and went as low as -2.41% in 1980. During recession, central banks lower rates pushing down the i.r. curve. When the spread starts contracting, market expects a coming cut of the i.r. and a future lower curve. For this reason, real world curves (vs academic ones) are decreasing on the long terms: a kind of economic cycle is implied. You may also read the spread under a credit risk point of view: a tight spread means "if an issuer can survive 2y, it is very likely that it will survive also 10y therefore a small extra premium is required". This is very clean in distressed bond issuers: implied yields usually form a reversed term structured (decreasing like an hyperbola). See more:
TVC:US10YLong
by TMoneyBidness
54
Treasuries Fall, Stocks Rise, Commodities Rise - US Markets WrapU.S. stocks rose by 1.1% today fueled by a 2.1% increase in small cap stocks and a 3.5% increase in energy stocks. The S&P 500 Index is currently up 0.5% year-to-date, and up 7.7% over the past 12 months. The Dow Jones Industrial Average is currently down 8.2% year-to-date, and down 2.0% over the past 12 months. Elsewhere, commodities climbed 1.6% with gold rising 1.0%, crude oil rising 4.0% and copper rising 0.7%. The yield on 10-year Treasuries is 0.85%, while the dollar strengthened by 0.1% against a basket of other currencies. Meanwhile, investment grade corporate bonds rose by 0.2%, and high yield bonds fell by 0.2%. These are the some of the main moves in markets: Stocks The S&P 500 Index rose 1.1%. The Dow Jones Industrial Average rose 1.6%. The Nasdaq Composite Index stayed level. The Nasdaq 100 Index rose 0.2%. Large cap stocks, as represented by the S&P 100 Index, rose 0.7%. Mid cap stocks, as represented by the S&P MidCap 400 Index, rose 2.0%. Small cap stocks, as represented by the S&P SmallCap 600 Index, rose 2.1%. Bonds The yield on 1-year Treasuries remained unchanged at 0.12% today. The yield on 5-year Treasuries increased by 4 basis points to 0.38% today. The yield on 10-year Treasuries increased by 6 basis points to 0.85% today. The yield on 30-year Treasuries increased by 6 basis points to 1.62% today. Credit Investment grade corporate bonds tracked by the Markit iBoxx USD Liquid Investment Grade Index rose by 0.2%. High yield bonds tracked by the Markit iBoxx USD Liquid High Yield Index fell by 0.2%. Emerging market bonds tracked by the J.P. Morgan Emerging Markets Core Index fell by 0.2%. Commodities The S&P GSCI Total Return Index, the leading measure of general commodity price movements, rose by 1.6% West Texas Intermediate crude oil rose by 4.0%. Gold rose by 1.0%. Copper rose by 0.7%. Silver rose by 1.9%. Currencies The Deutsche Bank Long US Dollar Index, which measures the greenback against a basket of other currencies, strengthened by 0.1% to $25.4 today. The Euro weakened by 0.1% to $1.16. The British pound weakened by 0.3% to $1.29. The Japanese yen strengthened by 0.1% to 104.77 per dollar. Cryptocurrencies Bitcoin rose by 0.3% to $13620 today. Ethereum rose by 0.7% to $385.97. Tether declined by 0.0% to $1.00161641180113. XRP declined by 1.4% to $0.24. This story was produced by the Kwhen Automated News Generator. For more articles like this, please visit us at finance.kwhen.com. Write to editors@kwhen.com. © 2020 Kwhen Inc.
AMEX:SPY
by kwheneditors
What Yield? 2-Year Treasury Lows May Signal It's Bitcoin Time Several stakeholders in the crypto market see a lack of yields coming from traditional markets as a sign cryptocurrency has a place in uncertain times. “We are moving into a period of stagflation – stagnant growth and inflation – which creates a steepening of yield curves in the fixed income world,” said Chris Thomas, head of digital assets for Swissquote Bank. Indeed, U.S. Treasury yields have dropped in 2020 – the two-year maturity is at its lowest yield in over 10 years. “I have a customer leaving bonds for bitcoin. I look at that as very bullish,” said Henrik Kugelberg, a Sweden-based over-the-counter crypto trader. “Bonds that are supposed to be the safest bet there is to actually make a buck on your invested money now all of a sudden seems less attractive than bitcoin.”
TVC:US02YLong
by danielcawrey
ZN1! 10Y T Note Futures ( 30MIN) probability: 65% the market will keep going down and do the pull back, please Read Carefully : The chart will keep going down and touch the Yellow Line ( You can use it as a TP manually) If the red candle cut it with Force then you can use the Green line as Your TP at the same time ( Resistance). If the candle Squeeze on the Yellow Line => Pull back and the market may keep going up. If the candle squeeze on the Green Line => pull back and we considere the Yellow Line as our First TP in our uptrend. After a Pull Back with Force the market may touch the Blue line . I will Try to Update my prediction if i have free time.
CBOT:ZN1!
by AliOmaRayan