Get started

Treasurybonds

TLT- Are rate cuts postponed? LONGTLT has been in a broadening wedge and formed a falling wedge within the larger pattern. Price bounced off the lower supoort trendline in the mid-morning of trading then rising to break out of the falling wedge. I see this as an opportunity to take a long trade in TLT and close out a TBT position at the same time. This reversal may be due to the value of existing bonds with the implications of a rate cut postponed beyond June. The faster RSI line has recovered to cross the 50 level lending further support to this long trade.
NASDAQ:TLTLong
by AwesomeAvani
US10Y Expect to see a new High.The U.S. Government Bonds 10 YR Yield has turned bullish on its 1D technical outlook (RSI = 60.193, MACD = 0.003, ADX = 38.653) as it crossed above the 1D MA200 again, with the 1D MA50 following right under it, with the two on an emerging 1D Golden Cross. We have anticipated that rebound from the HL of the Channel Up on our previous idea and our medium-term target (TP = 4.600%) is intact. If the 0.786 Fibonacci level breaks, we will buy after the first 1D MA50 pullback. The 1D RSI is also posting a similar early rally sequence to April-May 2023 and December 2022-January 2023. 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:US10YLong
by InvestingScope
TLT Long at VWAP Bounce T- Bills 20 yearsTLT on the 15 minute chart in the past two trading sessions consolidated and then fell into a pullback to the support of the anchored mean VWAP. Relative volatility spiked and has now contracted. I see this as a good entry to add to my TLT position having sold a good portion of it three trading days ago when price showed topping wicks outside the fibonacci highest band. This will be about $ 1.00 cheaper than before that sale and is part of a zig-zag strategy for TLT overall.
NASDAQ:TLTLong
by AwesomeAvani
$TLT - 20 year US Treasury, possible support -I'm huge ultra BULLISH on US treasuries currently, so please excuse my bias. Not in any specific order, however here are all the factors in this thesis... 1. Interest rates have dramatically increased since Jan 2021, and the overall bond market, including treasuries, had its worst 2 years on record, going back to 1915. 2. Since Nov 2022 just after Halloween, Jerome Powell, "top FED dude", has already said that interest will no longer get increased and that there's possibly three RATE CUTS this year 2024. Even if he said, "Rates will remain unchanged" is enough to make treasuries bounce back to even. (par value). 3. Looking at everything in Barron's most recent "Top Income Plays for 2024" from last week, US Treasuries now offer the most bang for buck interest rate 4.10% with the lowest risk, compared to every other income asset in that article. (i.e, Dividend stocks, muni bonds, REITS, preferred stocks, etc.,) 4. US treasuries are back by the full faith of the US Government. 5. There's now a website that tracks Congress women & men trades, capitol trades.com. And there's A LOT of them buying US Treasuries. 6. There's massive geopolitical risk right now and WW3 is now a word being used. 7. Bottomline: between the yield of +4% and the upside appreciation of treasuries being at the biggest discount in US History, I believe any pull back should bought. 8. COMPLIMENT OPTION STRATEGIES A. You could buy 100 shares of TLT and the following are low risk option strategies to compliment your 100 shares of TLT. i. Sell short term (30 days out) 1 call. If you buy 100 shares of TLT, then you can sell 1 covered call on TLT out of the money OTM, and take that premium and purchase another share of TLT. think "snow ball" effect. The strike I am selling on 1000 shares of TLT is Ten $98 strike TLT calls with 2/23 expiration. Then take that money and bought 10 additional shares of TLT. ii. If you want to get fancy with this, you can also add to the above covered call BUY WRITE and do a VERTICAL PUT SPREAD, aka Credit Put Spread to add to the income (which adds to the "Income Snow Ball" of something that is appreciating. Mo Money Mo Money! a. Sell $90 strike Put on TLT, 30 days out b. Buy $87 stake Put on TLT,, same exp, to cover your short put. c. This produces an extra $200 which you could spend on blow (or groceries) or you can buy 2 more shares of TLT. Weeeeeeeeeeeeee! thats capital generating income, that's generating income, being used to buy more of the thing that's appreciating in value, that's also generating income. THAT'S A LOT OF CHEDDAR!! After one month, THEN REPEAT. :)
NASDAQ:TLTLong
by jgeno
1
Macro Monday 30~U.S. Net Treasury International Capital FlowsMacro Monday 30 U.S. Net Treasury International Capital Flows In essence the U.S. Net Treasury International Capital Flows (US TIC Flows) refer to the movement of funds into or out of the United States through the purchase or sale of U.S. Treasury securities by foreign investors and governments. These flows of capital are an essential component of the overall balance of payments, reflecting the financial transactions between the United States and the rest of the world. What does the data represent exactly? The U.S. Treasury International Capital (TIC) system is compiled by the U.S. Department of the Treasury and provides information on cross-border financial transactions. The TIC data include details on purchases and sales of various U.S. financial assets and liabilities, such as Treasury securities, corporate bonds, equities, and banking flows. In simple terms the Foreign Purchases of U.S. Securities (inflows) are taken away from the U.S. Purchases of Foreign Securities (outflows) to present a overall net figure. The net result of these two components determines whether there is a net inflow or outflow of capital. What are the drivers of positive & negative flows? Positive Flows (>0 on chart) POSITIVE FLOWS in U.S Net Treasury International Capital result from factors such as attractive U.S. interest rates, a stable domestic economy, and global uncertainty that drives foreign investors to seek the safety of U.S. Treasury securities. During these periods, there is a net inflow of capital into the United States pressing the number higher above zero. Negative Flows (<0 on chart) Conversely, NEGATIVE FLOWS occur when other countries offer higher returns, there are concerns about the U.S. economic outlook, or global risk aversion prompts investors to repatriate funds. Exchange rate movements also play a role, as a stronger U.S. dollar can make U.S. assets less appealing. The interplay of the above mentioned factors influences the direction of international capital flows, which impacts the balance of purchases and sales of U.S. Treasury securities by foreign and domestic investor. Now that we have a general sense of what’s driving the data, and what makes an overall net positive and or net negative flow, let’s have a look at the chart. The Chart ✅ Since Jan 2019 there has been an upward trend in Treasury Inflows into the U.S (Black Arrow). ❌This upward trend had one sudden interruption causing a decline from Mar - May 2023 going from positive inflows of $114B to negative outflows of $159.4B, the timing of which coincided with the 2023 U.S Banking Crisis where three small-to-mid size U.S. banks failed. ✅ Since the Banking Crisis in May 2023 Treasury Capital flows have moved from overall negative outflows of $159.4B to overall positive inflows of $260.2B. A major turn around and reversion to the long term trend. ✅The recent surge in positive inflows to $260.2B are the highest recorded since August 2022 ($275B) In summary inflows to U.S Treasuries have been in an general uptrend since January 2019 with one brief interruption from Mar – May 2023 and inflows have increased significantly in recent months and look like they may be about to take out the Aug 2022 highs. Recession Patterns 1. More isolated recessions that were not globally systemic events led to positive net inflows into the U.S. Treasury however larger global events led to outflows from U.S. Treasuries, particularly if those global events involved the U.S. engaging in foreign conflicts. ▫️ During the DotCom Crash (No. 3 on the chart) – The tech sector was badly hit but it was not necessarily a global recession with the associated geopolitical turmoil. Foreign investors sought safety in the U.S. Treasury Market during this time. ▫️ Similarly during the brief Gulf War Recession (No. 4 on the chart) you can see that initially, there was increased net inflows however in Jan 1991 inflows sharply turned to outflows which coincided with the U.S. led invasion of Kuwait (a response to Iraq’s invasion of Kuwait). This was considered a global event and thus led to an exodus of outflows and repatriation of funds from the U.S Treasury Market. ▫️ More recently during the Great Financial Crisis (no. 2 on the chart) and the COVID-19 Crash (No. 1 on the chart) there was a significant outflow from U.S. Treasuries due to the magnitude of these global events. You can imagine foreign market participants clawing funds back into their respective countries to batten the hatches and get into a defensive financial position with global systemic risks high. Better to have a bird in the hand than two in the bush when the bush is on fire. ▫️One other pattern worth mentioning is highlighted in yellow on the chart with an A, B and C. Prior to the Great Financial Crisis and COVID-19 crashes we first had a reduction in overall U.S. Net Treasuries of $373B (A on chart) and $393B (B on chart), respectively. Within 13 to 16 months of both treasure drawdowns we had a recession. We recently had a drop of $437B (C on chart) which ended in May 2023. If history repeats and we had a recession within 13-16 months of this happening, this would be sometime between June and Sept 2024. An alternative view would be that the increase in declines from $373B (A) to $393B (B) to $437B (C) may correspond with the shortening timeframes from 16 months(A) to 13 months(B) to potentially 10 months(C) for the current $437B drop (C on the chart). This would suggest March/April 2024 as a potential recession timeframe (based on the historic reductive time pattern). The U.S. Net Treasury International Capital Flows is a fascinating chart to keep an eye on and should be added to the economic data armory as it will help us interpret what is really going on in the treasury market (there is a lot of false narratives out there ATM). It is also useful in informing us on what the global perspective is in terms of systemic risk vs isolated risk, and also from a historic recessionary standpoint offers value. The best investors in the world call the bond market the market of truth but I have found it hard to find a chart that illustrates this through a global lens UNTIL today. This chart captures that beautifully. Thanks for coming along again PUKA
ECONOMICS:USCFLong
by PukaCharts
2
US 10Y : "FED vs MARKETS" (...who will win?)Hello Traders! The FED's monetary policy is not convincing the markets, but Powell seems very determined to meet his inflation targets. In near term, market seems to want to counter this hawkish monetary policy, but that could change going forward. In short term, yields remain at high levels and I don't exclude that this rally could continue for the last bullish impulse with wave 5 formation. Does this bullish pattern meet economic fundamentals over the medium term? ...What is your opinion? -------------------------------------------------- -------------------------------------------------- ...trade with care! 👍 If you think that my analysis is useful, please... "Like, Share and Comment" ...thank you! 💖 Cheers!
TVC:US10YLong
by TheAnonymousBanker
23
10Y Treasury Bond Is Looking For A Bigger RecoveryTreasury bond - 10Y US Notes came down a lot in the last two years but this cycle can now come to an end as we can see five waves down into 2023 lows ona weekly time frame. In fact, we also see five subwaves completed within wave (5) on a daily chart after prices recovered and break above the trendline resistance. The move is strong, thus we think that more upside can be coming within a three-wave (A)-(B)-(C) rally, where first leg (A) can be still in progress or maybe already completed as an impulse. Support on subwave 4 or wave (B) dips are at 110-111.
CBOT:ZN1!Long
by ew-forecast
1-Treasury bills give the same returns as S&P 500 with less riskWall Street Investment banks are predicting various prices for the S&P 500 close at the end of 2024. But if the current 1-year Treasury Bill Yield is the same as the estimates then why bother buying the S&P 500? It would be safer buying bills and you may get an equal return. This piece of analysis will look at: Historical accuracy of Wall Street Banks S&P 500 estimates for the year ending Current predictions for S&P 500 estimates for year-end 2024 The current yield on 1-year Treasury Bills Comparison between the estimates for the S&P 500 vs. 1-year Treasury bills. Historical analysis According to research done by Bespoke Investment Group and by CNBC. Excluding 2008, the analyst overshoot of the S&P 500 actual performance over the past 15 years goes down from being over 9% off to a miss of 3.4%. And the fact that analysts overshot the actual market performance 12 out of 15 times, means they did undershoot it three times. When looking at their S&P 500 price target prediction, analysts undershot the actual performance in seven of the past 20 years.1 Historically, these forecasts have often underestimated the actual market performance, especially during the bullish period since 2009, when they were off target seven out of nine times. The average annual projection tends to be around 9.3%, aligned with the S&P's historical average gain. 2 So, overall, excluding the outlier of 2008, analysts tended to overshoot their predictions of the S&P 500 performance by a decreasing margin over the past 15 years, moving from an initial overestimation of over 9% to a more moderate miss of 3.4%. Their track record shows a pattern of overshooting the market's actual performance in 12 out of 15 instances, with just three instances of undershooting. Current predictions BMO Capital Markets: $5,100 Deutsche Bank: $5,100 RBC Capital Markets: $5,000 UBS: $4,700 Goldman Sachs: $5,000 Bank of America: $5,000 Barclays: $4,800 Wells Fargo: $4,600 Morgan Stanley: $4,500 J.P. Morgan: $4,200 Average = $4,800 Median = $4,900 Mode = $5,000 1-Year Treasury Bill The current yield on the 1-Year Treasury Bill is 5.061%. The reasons for the yield being somewhat high are: Strong Economic Data: The resilience of the U.S. economy, especially the robustness of the jobs market, has surprised many experts. Despite expectations for a slowdown, the economy continues to perform well, leading to higher yields. The Federal Reserve's cautious approach to cutting interest rates too quickly is another reflection of this strong economic backdrop. Fed's Cautionary Stance: The Federal Reserve is wary of cutting rates swiftly due to concerns about inflation and the tightness of the labour market. They aim to maintain a balanced approach, keeping rates at a level that won't spur excessive inflation but also won't hinder economic growth. The shift in Fed Messaging: Recent messaging from the Fed indicated less aggressive rate cuts in the future than previously expected. This change in outlook, particularly with the Dot Plot showing fewer rate cuts in 2024, has influenced bond market sentiment. Increased Treasury Issuance: The U.S. Treasury's substantial pace of issuing new debt has disrupted the supply-demand equilibrium in the bond market. The unexpected announcement of raising a significant amount of money through bond sales has added pressure to yields as more bonds flood the market. Yield Curve Dynamics: The yield curve, which had previously inverted (short-term yields higher than long-term yields), is now experiencing a lessening of this inversion. Typically, this occurs as short-term rates fall while long-term rates rise. However, the current situation is unique as the long-term yields are increasing while short-term rates remain relatively stable. The surge in Treasury yields reflects a confluence of factors: a resilient U.S. economy outperforming expectations, the Federal Reserve's cautious approach to rate cuts amid concerns about inflation and a tight labour market, a shift in Fed messaging signalling fewer future rate reductions, increased government borrowing, and the unique dynamics of the yield curve. This unexpected rise in yields diverges from earlier predictions of a decline, shaping the current landscape of the bond market and influencing borrowing rates for consumers and businesses alike. One's prediction of the future yield in a year may be higher or lower. But regardless, when you buy a bond it is stuck at that yield since it represents the interest earned. S&P 500 vs Treasury bills Yesterday's close of the S&P 500 was $4,567.18. If we assume the S&P 500 will reach the average and median estimates that represents a 5.10% and 7.13% return on investment respectively. However, as we have established above looking at the historical analysis of Wall Street estimates they tend to overestimate. Most of the time the S&P 500 closed below their estimate. Wall Street estimates between 2000 and 2018 have an average overshoot of 4.40% from the table above. So there is reason to assume they will do the same this year. If we assume the estate's average and median return of 5.10% and 7.13% respectively are overshooting. That means we might as well invest in 1-year Treasury Bills. Why? Because Treasury bills are safer, and guaranteed return and if they are giving similar returns to the more risker S&P 500 over the next year then why bother with the risker alternative? It makes more sense to just buy 1-year Treasury Bills. Conclusion In the landscape of investment choices for the year ahead, the comparison between the S&P 500 and 1-year Treasury Bills offers compelling insights. The historical analysis of Wall Street's predictions demonstrates a consistent pattern of overestimation, signalling a potential trend that might repeat itself in the current estimates for the S&P 500 for year-end 2024. With the current projections showcasing potential returns for the S&P 500, it's crucial to consider the safety and reliability offered by 1-year Treasury Bills, especially given their current yield, standing at 5.061%. The compelling argument arises when assessing the historical trend of overestimation by financial analysts in forecasting S&P 500 performance. If these estimations continue to overshoot, as historical data suggests, the seemingly safer investment in 1-year Treasury Bills could provide comparable returns with considerably lower risk. The prudent approach might lean toward the Bills, given their guaranteed return and stability, particularly if they yield similar or better returns than the potentially riskier S&P 500. The choice between the S&P 500 and Treasury Bills becomes a contemplation of risk versus stability. While the S&P 500 might offer potential gains, the historical trend and current projections invite consideration of the Bills as a safer and possibly equally rewarding investment option for the upcoming year. Ultimately, it might be prudent for investors to weigh these factors carefully before making their investment decisions for the year ahead. 1 www.cnbc.com 2 seekingalpha.com
SP:SPX
by BlackbearTrader
Strongest Recession Signal EverThe yield curve has inverted to the most extreme degree ever, which is a warning that a recession is coming. In this video, I analyze the charts for the AMEX:SPY S&P 500, NASDAQ:NVDA Nvidia, NASDAQ:AAPL Apple, and the yield curve on U.S. Treasurys to see what they're telling us about future price action. In the video, I mention that the bull rally following the Great Recession was primarily due to the Fed's monetary easing. The chart below shows evidence of this. When the value of the assets added to the Fed's balance sheet is compared against the value of the S&P 500, the stock market appears to have essentially moved horizontally. This shows that the primary reason for the stock market's rally is the central bank's extreme expansion of its balance sheet. If you enjoyed this post, I would greatly appreciate it if you leave a boost! If you have any questions or would like to share your thoughts, feel free to leave them in the comments below. Important Disclaimer Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
TVC:US10Y
by SpyMasterTrades
97
🐹 Caution To All TLT Hamsters - TBT Has More Room to DeliverTBT is a UltraShort 20+ Year Treasury ETF. This Fund seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the Daily performance of the ICE U.S. Treasury 20+ Year Bond Index. 1. Always look first. Never rush into a trade or investment blindly. 2. Wait, and wait again, for the pattern to develop. 3. Be patient and use alerts to get notified when the time is right. 4. Measure trading ranges and adjust your plan for sideways action. 5. Look for bases and consolidations. 6. Zoom out and look for historical levels of support and resistance within those bases or consolidations. 7. Markets can go sideways longer than traders can stay solvent. 8. Adjust your stop loss and take profit targets for the choppy price action. 9. Be prepared for false breakouts and false breakdowns. 10. Choppy markets do not trade like trending markets. Technical picture in AMEX:TBT indicates it has possibility to further upside price action, up to 57 - 60 U.S. dollars per share, as key multi year resistance (5-years simple MA) has been successfully broken at the end of 2022.
AMEX:TBT
by PandorraResearch
Reverse Triangle (ABCD) set up, D leg of the bullish CypherLooking at the Monthly Chart of the TLT 20yr bond etf. I see a large ABCD Pattern Set up. The Initial Triangle has not completed. Currently there is heavy selling in Bonds (C leg sell off to D leg of the bullish cypher) The Trend Line was breached, and now the sell off is acting like a Magnet to retest 2008 lows. It's worth noting this sell off appears to be A bullish Cypher pattern set up Around D leg. This set up is also tie to the USA real estate market. Based on the 18 year real estate theory, we're only 13 years removed from the 2009 financial market lows. Also based on the 18yr real estate theory, I see a project crash around 2027-2028. Which is likely due to a property tax crisis. At the bottom of the chart you'll see the Stochastic has already bottom, however the AD is still in overbought territory. You want to be buying when both the AD and the stoch are bottom together like in 2008-2009 (see white box).. Dollar cost averaging into the 20yr bond etf is not a bad idea either. With Bond yields currently over 4% and likely to reach 6%-7% before the TLT finally bottoms is a good hedge. I also like the fact in the future, I can write cover calls against this position, which will lower my cost basis even more in the future. I'm not looking to short bonds here, i'm a long term buyer of the dips with a breach of $90... price action could take this below $84, possible $78 but $84 is my target based on the last recession in 2008. Dollar Cost Avg for the win long term for the next 20yrs
NASDAQ:TLTLong
by moneyflow_trader
3
Bitcoin Has Absorbed $26,500 but What's This?Traders, In my last post I stated that BTC must absorb the price of 26,500 for the bulls to come back out and play again. It did. Now, we are running into the 50 day moving avg. which is acting as resistance and should give those of us seeking re-entry into longs a bit of time to make those entry decisions. However, I spotted something sus on the U.S. treasuries chart and it seems that nobody is really talking about this. Both the 10yr and the 2yr experienced a massive spike! What caused this? TBH, it is causing me some hesitation. Could this be pre-indicative of a credit event of some sort? Thoughts, links, data are appreciated in the comments below. Stew
INDEX:BTCUSD
by stewdamus
3 Month Bill Drops To 5.3%In this video, it was difficult to explain everything -- The first thing we look at is the 3-month bill the price of this bond -- Is set to drop as of this writing Later the price will be baked into the market -- In about 4 days from now This is very important to understand -- Because the financial market is backed by Bonds -- Once you understand bonds then you will learn How you can well profit from this type of market psychology -- Watch this video to learn more -- Disclaimer: Do not buy or sell what i tell you to buy or sell do your own research before you trade This is not financial advice -- To learn more about this topic rocket boost this article
TVC:US05YEducation
by lubosi
US 10 Year Treasury vs USD/JPYTLDR: The US 10-Year Treasury Yield and the closely correlated USD/JPY pair can be determinants or signals of market risk. With both breaking their three decade long trends, you have to wonder is a major secular shift upon us. The USD/JPY currency pair has traditionally had a close correlation with U.S. Treasuries. The pair shows how many yen are required to buy one U.S. dollar The pair's exchange rate is one of the most liquid, not to mention one of the most traded, pairs in the world. That's because the yen, just like the U.S. dollar, is used as a reserve currency. When yields on Treasury bonds, notes, and bills rise, the Yen tends to weaken relative to the dollar. When interest rates head higher, Treasury bond prices go down, which lifts the U.S. dollar, strengthening USD/JPY prices The US 10-Year Treasury Yield and the closely correlated USD/JPY pair can be a determinants or signals of market risk. With both breaking their three decade long trends, you have to wonder is a major secular shift upon us.
TVC:US10Y
by PukaCharts
US debt ceiling debacle and US 10-year yieldsUS 10-year bond yields have been trending lower since Oct 2022 after touching high around 4.250%. The rise in the 10-year yield from the past two weeks saw yields stop just short of the blue 61.8% Fibo level of 3.885%. Yields are currently testing the 200-day MA rate of 3.649% and a break below will allow bonds to rally further towards the 50-day MA rate of 5.525% which coincides with the black 61.8% Fibo rate of 3.474%. I expect bond yields to get intimidating soon as the bond rally runs out of steam. Here follows the main fundamental reasons why I believe 10-year bond yields will soon climb above 4.00%. 1. Global financial conditions are easing, and excess liquidity is rising. Short-term rates seem to be peaking not just in the US but globally. Once global rates have peaked, it will allow the market to price in a future cyclical upturn for the US economy. Longer-term yields will capture this sentiment by moving higher as investors will prefer riskier assets to reap the rewards on buoyant liquidity conditions. 2. Inflation is becoming entrenched. Bonds are not a good inflation hedge which will further motivate the sell-off in longer-term treasuries. Heightened inflation expectations are the canary in the coal mine warning that bond holders may soon demand extra yield to lend money. 3. Bond issuance will rise when the debt-ceiling debacle is resolved. Additionally, the debt ceiling has brought scrutiny to the US’s fiscal situation which will dampen investor appetite for US debt (safe haven or not). Furthermore, foreign reserve holders have begun to diversify their holdings, while elevated short-term rates have raised FX hedging costs and kept buyers like Japan away.
TVC:US10Y
by Goose96
1
Harvesting Risk Hedged Treasury YieldEver heard of risk-free rates? Risk free rates are commonly understood to refer to interest rates on 10-year US treasuries. These are considered risk-free as the likelihood of the US government defaulting is considered extremely unlikely. Treasuries pay out a fixed interest and can be redeemed for their face value at maturity. Fixed returns and negligible default risk make treasuries a critical addition to any decent investment portfolio. With inflation on the downtrend and Fed’s hiking cycle nearing its apex, long term treasuries provide a fixed income-generating asset with no reinvestment risk. Little default risk does not mean zero market risk. As highlighted in our previous paper , bond prices are materially exposed to interest rate risk. CME Group’s treasury futures allow investors to hedge that risk. This paper has been split into two parts – the first provides an overview of treasury futures and their nuances while the second walks through the trade setup required to harness risk-hedged yield. TREASURY FUTURES Treasury futures enable investors to express views on a bond’s future price movement. Investors can also hedge against interest rate risk by locking in a coupon rate. CME treasury futures are deliverable with eligible treasury securities which ensures price integrity. QUOTING Treasuries are quoted in fractional notation as a percent of their par value. For instance, a bond quoted at 111’272 suggests that it is trading 11 + 27.2/32 (11.85%) above its par value. This allows standardized quotation of bonds with different coupon rates. Note that notion of quotes in cash markets may be different from futures. AUCTION SCHEDULE Treasuries are auctioned periodically depending on their maturity duration. • Treasury Bills with maturity between 4 to 26 weeks are auctioned every week while T-Bills with maturity of 1-year are auctioned every four weeks. • Treasury Notes with maturity of 2, 3, 5, and 7 years are auctioned every month while T-Notes with maturity of 10-years are auctioned every quarter. • Treasury Bonds are auctioned every quarter. The auctions for each type of security are staggered to reduce their market impact. CONVERSION FACTOR It is possible for a large range of “eligible” treasuries to be available for deliveries against standardised futures contract as new treasuries are regularly auctioned at changing rates. The most recently auctioned securities that are eligible for delivery are called “on the run” securities. To standardize the delivery process for varying securities, a conversion factor unique to each bond is used. The buyer of the futures contract would pay the Principal Invoice Price to the seller. The Principal Invoice Price is the “Clean Price” of the security and is calculated by applying the Conversion Factor to the settlement price. When the Conversion Factor is less than 1, the buyer pays less than the settlement price and when it is higher than 1 the buyer pays more. ACCRUED INTEREST In addition to the adjustment for the quality of the bond being delivered, the buyer must also compensate the seller for any interest the bond would accrue between the last payment and the settlement date. The final cost to deliver the treasury futures contract would be the Clean Price + Accrued Interest. CHEAPEST TO DELIVER Due to the Conversion Factor, which is unique to each bond, some bonds appear to stand out as cheaper alternative for the seller to deliver. So, if a seller has multiple treasury securities, a rational seller will choose to deliver the one that best optimizes the Principal Invoice Price. As a result, futures price most closely tracks the Cheapest-to-Deliver ("CTD”) securities. This also provides an arbitrage opportunity for basis traders. In this case, the basis is the relationship between the cash price of the security and its clean price on the futures market. Small discrepancies in these may be profited upon. Notably, specialized contracts such as CME Ultra 10-year Treasury Note futures with selective eligibility requirements diminish the effects of CTD by reducing the range of deliverable treasuries. HEDGING BOND PRICE RISK WITH TREASURY FUTURES Treasury securities are a crucial and substantial addition to any well diversified portfolio, offering income generation, diversification, and safety. With interest rates elevated and inflation heading lower, coupon rates for long-term US treasuries are yielding positive real returns. Moreover, 10Y yield is hovering at its highest level in 13-years suggesting a strong entry point. Since the coupon rate of the security is fixed and they can be redeemed at face value upon maturity, the present higher yielding treasuries are a great long-term income generating investment. Despite the inverted yield curve, which suggests yields on longer-term securities are lower, a position in long-term bonds protects against reinvestment risk. Reinvestment risk refers to the risk that when the bond matures, rates may be lower. With Fed at the apex of its hiking cycle, rates will likely not go any higher. So, a position in long term T-bond, locked in at the current decade-high rates, offers a lucrative opportunity. The position also benefits in the uncertain scenario of a recession as bond prices rise during recessions. This investment fundamentally represents a long treasury bond position which profits in two ways: (a) Rising bond prices when interest rates decline, and (b) Coupon payments. If the coupon payout is unimportant, fluctuations in the bond price can be profited upon in a margin efficient manner using CME futures. This does not require owning treasuries as the majority of the treasury futures are cash settled with just 5% reaching delivery. In the fixed income case, the bond is held until maturity which leads to opportunity costs from bond price fluctuations. CME futures can be used to harvest a fixed yield from treasuries and remain agnostic to rate changes, by hedging the long treasury position with a short treasury futures position. This position is directionally neutral as losses on one of the legs are offset by profits on the other. The payoff can be improved by entering the short leg after bond prices are higher. To hedge treasury exposure using CME futures the Basis Point Value (BPV) needs to be calculated. BPV, also known as DV01, measures the dollar value of a one basis point (0.01%) change in bond yield. BPV depends upon the bond’s yield to maturity, coupon rate, credit rating and face value. Notably, BPV for longer maturity bonds is higher as their future cashflows are affected more by changes in yield. Another commonly used term is modified duration which determines the changes in a bond’s duration or price basis of a 1% change in yield. Importantly, the modified duration of the bond is lower than 100 BPV’s since the bond price relationship to yield is non-linear. BPV can be calculated by averaging the absolute change in the bond’s yield-to-maturity, its value when held until maturity, from a 0.01% increase and decrease in yield. Where there are multiple bonds in a portfolio, the BPV for a unit exposure will have to be multiplied by the number of units. On the futures side, BPV can be calculated as the BPV of the cheapest to deliver security for that contract divided by its conversion factor. By matching the BPV’s on both legs, the hedge ratio can be calculated. This represents the number of contracts needed to entirely hedge the cash position. SUMMARY OVERVIEW OF CME TREASURY FUTURES CME suite of treasury futures allow investors to gain exposure to treasury securities across a range of expiries in a deeply liquid market. Each futures contract provides exposure to face value of USD 100,000. The 2-Year, 5-Year, and 10-Year contract are particularly liquid. Micro Treasury Futures are more intuitive as they are quoted in yields and are cash settled. Each basis point change in yield represents a USD 10 change in notional value. These products reference yields of on-the-run treasuries and settled daily to BrokerTec US Treasury benchmarks ensuring price integrity and consistency. Micro Treasury Futures are available for 2Y, 5Y, 10Y, and 30Y maturities enabling traders to take positions across the yield curve with low margin requirements. TRADE SETUP TO HARVEST RISK HEDGED TREASURY YIELDS A long position in the on-the-run 10Y treasury notes and a short position in CME Ultra 10Y futures allows investors to benefit from the treasury bond’s high coupon payment while remaining hedged against interest rate risk. Hedge ratios can be calculated using analytical information from CME’s Treasury Analytics Tool to obtain the BPV of each of the legs: The on-the-run treasury pays a coupon rate of 3.375% pa. and its last quoted cash price was USD 98.04. It has a DV01 of USD 76.8. Since, each contract of CME Treasury Futures represents face value of USD 100,000, the long-treasury position would need to be in multiples of USD 100,000. For a face value of USD 500,000 (USD 100,000 x 5) this represents a notional value of USD 490,000 (Face Value x Cash Price) . The long-treasury position's DV01 = USD 76.8 x 5 = USD 385. The cheapest-to-deliver security has a DV01 of USD 92.2 and a conversion factor of 0.8244. The futures leg thus has a BPV = Cash DV01/Conversion Factor = USD 92.2/0.8244 = USD 111.8. The hedge ratio = BPV of Long Treasury/BPV of Short Futures = USD 385/USD 111 = ~4 (3.4) So, four (4) lots of futures would be required to hedge the cash position which would require a margin of USD 2,800 x 4 = USD 11,200. Though the notional on the two legs does not match, the position is hedged against interest rate risk and pays out 3.375% per annum in coupon payments. 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 www.tradingview.com 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.
TVC:US10YEducation
by mintdotfinance
1
Unveiling the Secret Relationship: US 10-Year Treasury and GoldAs you may already know, the US 10-Year Treasury is a government bond that benchmarks long-term interest rates. Investors often turn to this instrument as a safe haven during times of economic uncertainty or market volatility. In contrast, gold has long been considered a store of value and a hedge against inflation. It is highly sought after in times of economic distress, making it a popular choice for investors looking to diversify their portfolios. What's truly captivating is the observation that the US 10-Year Treasury and the price of gold tend to move in opposite directions. When the yield on the 10-Year Treasury rises, indicating increased investor confidence and potentially higher interest rates, the price of gold often experiences a decline. Conversely, gold prices tend to increase when the yield on the 10-Year Treasury falls, signaling economic uncertainty and the potential for lower interest rates. This inverse relationship can be attributed to various factors. Firstly, rising interest rates make fixed-income investments, such as bonds, more attractive, diverting funds from non-yielding assets like gold. Secondly, as the US dollar strengthens with higher interest rates, gold, priced in dollars, becomes relatively more expensive for foreign buyers. Lastly, lower interest rates often lead to increased inflation expectations, making gold an appealing investment due to its historical ability to preserve purchasing power. You might wonder how this knowledge can practically apply to your trading strategies. Well, my friend, here comes the call to action: I encourage you to closely monitor the direction of the US 10-Year Treasury to predict potential movements in the price of gold. By staying informed about the yield fluctuations of the 10-Year Treasury, you can gain valuable insights into the overall market sentiment and potentially anticipate shifts in gold prices. This knowledge can help you make more informed trading decisions and position yourself advantageously in the market. Remember that while the inverse relationship between the US 10-Year Treasury and gold has proven to be a reliable indicator, conducting a thorough analysis and considering other factors that may influence gold's price is essential. Market conditions are ever-changing, and no single hand can guarantee success. Therefore, combining this knowledge with other technical and fundamental analysis tools is crucial to maximize your trading potential. In conclusion, understanding the inverse relationship between the US 10-Year Treasury and gold can be valuable to your trading arsenal. By closely monitoring the direction of the 10-Year Treasury, you can gain insights into potential movements in gold prices, allowing you to make more informed trading decisions.
FXOPEN:XAUUSDLong
by bryandowningqln
TMF - Long Term Leveraged Treasury ETFOn this 4H Chart TMF has rallied in the past week about 9% as the reports of the impetus of inflation has diminished. On the zero-lag MACD, the lines are staying above the histogram which has not converted from negative to positive. The dual time frame RSI showing low 1 hour TF in blue and daily TF in black has the lower crossing over the higher both at the lows on July 10th and now both over 50 with the low 1 hour TF still above the higher daily TF. This confirms bullish momentum. Price is on a VWAP breakout ascending from the support of the 2nd negative mean anchored VWAP to above the mean anchored VWAP with a retest as well. Price is now above the POC line of the volume profile demonstrative the dominance of buying pressure over selling pressure. On the ADX indicator, a positive trend is rising while down trend is dropping proportionately with the intersection and cross occurring on July 12. Positive ADX is staying above 20. Overall I see this as an excellent setup for a long swing trade targeting 8.05 in the area of the values of the highs of June. A higher target would be about 8.3 where there were some recent pivots If the fed does an about-face and pauses rate hikes, a significant rally could ensue.
AMEX:TMFLong
by AwesomeAvani
3
TBT Treasuries Bear Leveraged ETFTBT is going to take another swing now that interest rates are going up. Fundamentally, Treasuries and other bonds will go down on their real face value because their yield is lower than the new going rate. Inverse EFTs like TBT will go up when Treasuries go down. On the w Chart chart, price is sitting above the POC line of the volume profile where there is support and high volatility. Above the line shows buyers in control ready to move price higher. The Awesome Oscillator flipped green today after the fed news showing that selling momentum has been replaced by buying momentum ( capitulation at the bottom). The volume indicator shows a clear uptick in buying volume. TBT offers options to further leverage this trade. I will take a call options position of several contracts for the 5/12 expiration at a strike about 5% below the current price. I expect 100% return on risk by next Monday and more after that.
AMEX:TBTLong
by AwesomeAvani