Get started

Yields

Real Yields vs. GoldThe correlation between real yields and gold price is well known, has strengthened since 2018 and in many ways works a lot better than e.g. the one with the M2 Money Stock. The (speculative) overshoot in gold in August 2020, very much like the one in August 2011 has corrected. Assuming the correlation remains strong, further price action in gold will depend on where real yields go. After the GFC real yields reached -1.67%. Considering the largest portion of bankruptcies of this recession is yet to come and seeing that real yields during the aftermath of the GFC occurred in Sep 2012, almost five years after it started, combined with record debts mandating low yields and low inflation expectations, I suspect in the coming years real yields will go lower and barring attractive investment opportunities gold still higher. NB: In 2012 gold could not achieve another record high despite lower real yields. The high from 2011 remained the record high until this year. Silver is included for comparison, it is not far off the mark.
ULong
by starfox2000
Metals sold off yesterday because of bond yieldsIn a recent post, I showed the strong correlation between inverted real bond yields and gold and silver: The hot inflation data yesterday and today drove nominal bond yields sharply higher. Bond investors demand higher yields when inflation is hot, which is why nominal yields rose. The rise in nominal yields broke a trend line. Here is the trend line break on the nominal 10-year yield: The trend line break suggests it might be a good time to be short on treasury bond funds like VGLT, since bond prices fall as nominal yields rise-- however, keep reading, because as I'll note later in the post, you've got to beware of Fed yield curve control. The picture for real yields is a little more complicated. The real yields chart above only shows data up to August 10, because the chart lags a couple days. Real yield is calculated by subtracting 10-year breakeven inflation from 10-year nominal yield. FRED's 10-year breakeven inflation rate was priced at 1.63% as of last update yesterday: However, the new CPI number implies an annualized inflation rate in the neighborhood of 6.0 - 7.5% this year. Obviously no one expects that to persist for 10 years, but the 10-year breakeven inflation rate is bound to keep creeping upward after this hot CPI read. The question is whether it will move upward faster than nominal bond yields. If so, then real yields will continue to fall. If not, then real yields will start to rise. It's possible, as a recent Seeking Alpha article argued, that the Fed is already exercising yield curve control to keep nominal 10-year yields in the range of 0.6-0.7%. If so, then we should expect nominal yields to stabilize here rather than to keep moving upward. If nominal yields do stabilize, then the rising 10-year breakeven inflation rate should continue to drive real yields lower and gold and silver higher. seekingalpha.com However, the trend line break in nominal yields suggests that if the Fed doesn't exert yield curve control, then we might see rising nominal yields outpace 10-year breakeven inflation for a little while, driving gold and silver lower. The next three or four days of real yields data should provide an important signal for where real yields and metals go from here. My best guess is that metals will bounce for at least the next day or two, and then we'll see from there.
AMEX:GLD
by ChristopherCarrollSmith
2
Wondering why GOLD drops? Here is WHY!Hey tradomaniacs, lots of Robin-Hood-Traders are asking themselfs: Why is gold and silver dropping? Well it can have a lot of reasons such as Profit-Saves due to the overbought situation, the fact that stock-market continues to climb and SPX500 is almost at its All-Time-High (portfolio turnover). It can be the fact that DXY (US-DOLLAR-INDEX) is oversold and so likely to retrace. There can be a lot of reasons but one very obvious correlation that makes sense: US BONDS YIELD went straight up after hitting an all-time-low. Why is that? When there is still uncertainy and fear the stock-market all the institutional traders are looking for save havens. Save havens are usually alternatives to stocks such as metals, currencies like YEN and CHF or BONDS as you get a safe and fix return for your investment. But what if the interest rates are too low? You look for alternative assets which are not interest. Gold has always been a save haven, which is the reason why the current rally makes no sense. Why would CHF, YEN, metals such as Silver and Gold climb at the same time? Because the market is uncertain! Gold currently has a negative correlation with US-BOND-YIELDS as it is a no interest asset and a good alternative for a low-interest-market. Watch these YIELDS when you do your analiysis for gold. ;-) LEAVE A LIKE AND A COMMENT - I appreciate every support! =) Peace and good trades Irasor Wanna see more? Don`t forget to follow me. Any questions? PM me. :-)
FOREXCOM:XAUUSD
by Trading2ez
1
Greece 10-year bond nearing ALL-TIME lowsReally, really remarkable to see this. Remember the Greek/eurozone debt crisis? That's what the big spike is. Now, here we are. Greek bonds are nearing their lowest levels ever. The only explanation is that people are seeking the safest form of assets in government bonds and Central Banks are becoming more helpful managing debt and supporting their countries. I share this as an observation that is shaping the world and the economy picture. It also is potentially showing the strength of the Eurozone and the way the countries are coming together. Pay attention to the EURUSD or European assets in these countries. If they are indeed balancing their budget, have their fiscal house in order, and the central banks are willing to support them, Europe could be ready for some more strength.
TVC:GR10Y
by scheplick
FR US yields vs EURUSDInterest rates are crucial in the movement of currencies. The blue is EURUSD. Those things are not 100 percent correlated but it is something that needs to be paid attention to. In this post I will demonstrate the relationship between French American bond yields (interest rates) differential and EURUSD. We use 2 principal yields 2 yearly and 5 yearly composite differential. As you see, once the yields differential hits the resistance or reversal level (here we use DeMark and Camarilla reversal levels) - there is a reaction in EURUSD. EURUSD keeps moving some 30 pips more (fakeout?) and then turns as well. On weekly differential chart we see that the differential is at 0 level after a poor bullish breakout. There is also fractal pattern in play. We also see DeMark monthly pivot squeeze on 60 min (DeMark squeeze predicts volatility and turns in the markets). You may also use German yields instead of French ones - not much difference actually. Both American and European yields are in their lowest levels. German ones dropped below 0.
TVC:FR02YEducation
by ICFX
Scary and Unthinkable: Negative Yields are ComingThe US 10 Year and really, yields around the world, have plummeted to levels no one thought was possible. However, the unthinkable has become thinkable. I believe the US 10 year is likely only a week or so from 0.500 and if the Fed cuts rates again this month (as is likely), we could see 0 by the end of the month. The real question though is will the 10 Year stop at around -0.150 or will it continue to fall? Only time will tell, but the near-term target is 0.000. In reality, it is very possible we can overshoot the lower trend-line to a whopping -1.000 or lower if the global economy shows no signs of any sort of stabilization and the virus continues to drag on and worsen. As we move into 2021, yields will likely stabilize and rise, however, this will not be a good thing. Contrary to other recessions and down-turns where the dollar actually rose, in this impending recession, the dollar (DXY) will fall (tank), Gold will go parabolic, and more worrisome, other commodities could eventually spike given the fall of the dollar. That means we could see a surge in inflation eventually, as fiat currencies lose their value as a result of negative rates. We are certainly entering unprecedented territory and investors must hedge against this unprecedented time by investing in Gold. At this present time, the only equities to seek out are high quality dividend stocks with a history of multi-decade dividend hikes. My favourite in this environment are utility stocks, such as Fortis, which has incredibly high stability and a whopping 46+ year dividend hike increase. This is not the time to be dip-searching because equities have still a long way to fall and still trade at 17-18x forward P/E representing still at-least a 10-15% overvalued market. At some point, the SPX will test the 2600s and we all better hope that level holds or we will see panic like we never thought would be possible again. Under no circumstance can equities have a sustained rally (that doesn't fade) until the 10 year hits at-least the +1.000-1.250 level which could months or years away. - zSplit PS: Once the US 10 Year hits 0, there will likely be some sort of massive algorithmic sell-off waiting to pounce; investors should have SLs ready for this.
TVC:US10YShort
by PaulDeep19131
7
How to play the Corona Virus from a macro perspectiveI am not a virologist, but I understand sentiment and a large part of my trading is looking at where people are overly fearful and where they are too complacent (at a basic level)... It's why I use Twitter so much. It's a great sentiment resource. If you were to do a search for Corona Virus on Twitter, 90% of people are bricking it. But step away from that and you find that people are still going to work, there's only small columns in newspapers talking about it and there's little mention of the amount of people the Influenza (flu) virus kills each year... This will sound crude, harsh and morally reprehensible, but I said to to people that follow me this morning that we want to be selling AUDJPY as a risk proxy (and because the Japanese 10 year is in for a rally, and AUDJPY follows the Japanese 10y yield, paradoxically) and to be taking some off with each new death toll announced, which seems to be revised every few days. As each death toll is announced, we get a greater understanding of the severity, which leads to a greater pricing of risk, and therefore, flattening of volatility. I always say, be aggressive when vol picks up and reduce your position when it flattens. Rinse and repeat, until another big theme emerges. I think the understanding of risk and trade management through the understanding of volatility is one that flies many by... So if you'd like to know how to better manage trades in this fashion, don't hesitate to shoot me a PM!
Short
by FinkPro
ORBEX: Look at Yields for Further Clues in Equities!Equities keep climbing higher on the back of renewed trade and Brexit optimism and also on the back of monetary policy decisions! Interest rates are on hold, but the Fed did cut three times in 2019! Will the surge continue into 2020? And if yes, when can we expect the massive sell-off everyone’s been talking about to take place? ake a pick as we near the end of a cautious year! Timestamps DXY 4H 02:10 SPX 4H 04:10 US Yields 06:10 Stavros Tousios Head of Investment Research Orbex This analysis is provided as general market commentary and does not constitute investment advice
TVC:TNX
by Orbex
ORBEX: Investors Brush-Off USMCA Headlines! Softening Dollar?JGB yields brushed off USMCA headlines yesterday and took a positive turn above the zero mark! JGB's haven't been positive since March 2019! Is this hinting that investors turn optimistic on global economies? Or just a shot-lived surge own to auction? Supported by impeachment uncertainty and poor US data yen rose against the greenback yesterday, however, the pound continued sliding on the back of no-deal risks. Will the US and UK GDP figures change the short-term outlook? Canadian retails are also due and they could be causing some short-term moves. Will they help loonie strengthen further? Timestamps USDJPY 1H 01:30 GBPUSD 1H 04:00 USDCAD 1H 05:40 Stavros Tousios Head of Investment Research Orbex This analysis is provided as general market commentary and does not constitute investment advice
by Orbex
2