Yields
10 year T Note: New long term bull cycle emerging?TNX has been trading within a 1M Channel Down since 2000 up until January 2018 when it broke the pattern upwards. The mini uptrend found Resistance on the MA200 and has been declining for the past 7 months. We are currently on the most support tests of all, as it has touched the 2000 Channel's Lower High trend line and will test it as a Support for the first time. If that provides a bounce then we may be at the very beginning of a new very long term bull cycle. A Golden Cross formation should come as confirmation.
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Meaningful low set?On the technical side the minimum targets for a Vth wave flattening trend that started since 2011 have been met. This completed sequence show's there is plenty of room to steepen over the coming Quarters.
So far we have seen wave A and B of an incomplete ABC. Well done all those who are riding the 'C' leg with us.
Best of luck to those who are positioned for the next two levels of interest at 116/117. The biggest picture would suggest there is even more upside over time.
The Yield Curve of the US Free Markets 10Y-30Y Combination CaseThe Yield Curve of the Free Markets ... 10Y-30Y Combination Case.. - US Bonds maturities of 10 Year and 30 Year (long maturities) are mostly influenced by free market participants and not by the FED Funds ... at present time they are not tightening as most combinations based on more short maturities. The indicator in the chart, the combination 10Year-30Years is steepening, sending a different message a possibility of expanding the duration of current economic cycle.
US recession indicators. Yield Curve Inversion part 4 ...US recession indicators. Yield Curve Inversion part 4 ...
Gold target range 15000-45000 USD: fundamental discussionThis chart depicts the gold price in dollar for the next decades.
As a background it is highly recommended to view my idea here:
This chart depicts the US gold reserves divided by the interest on debt.
The interest on debt is calculated as a proxy by multiplying the 10 year interest rate with the total federal debt.
Whether this is accurate or not is not so important as we just want to compare this ratio with its historic values.
It is important to note that official US gold reserves have remained unchanged since the closing of the gold window in the early 70's.
This metric has risen and fallen quite a bit.
First this metric rose during the stagflation of the late 70's.
The gold reserve of 262 million ounces hit a high of 222 billion whilst the yield did a first peak to 13.5% with the debt, barely over 900 billion our proxy interest was about 120 billion and thus the gold reserve was almost able to pay it off twice.
It is my belief that the rise in gold prices and with it the value of the US gold reserves is what cooled the debt market causing it to revert course into a 4 decade long bull.
Interest rates plummeted, federal debt rose faster, and gold also went down in price.
At the turn of the century gold found itself trading at 290 dollar, the gold reserve reduced to 76 billion, the US debt grown to close to 6 trillion and the treasury rate reduced but at times peaking to close to 7%, the ratio hit a low of just 0.2 years of interest on debt that could be paid by the gold reserve.
The next 11 years were marked with a continuing of the bond bull run whilst also gold rallied to a new all time high.
By 2011 and 2012 the ratio hit close to 2 years again thanks to gold trading at 1800 and the yield as low as 1.5%.
Since then, rising yields and declining gold prices have hit this ratio back to about the middle range.
Technically, not much can be said where we go from here so we'll have to take a look at the fundamentals.
While multiplying the 10yr with the debt is a nice workaround to picture the interest on debt by tradingview the real interest on debt is more difficult to compute.
The US debt consists of bonds with various denominations running from 30 year bonds to bonds with maturities of less than 1 year.
This means that of the 30 year bonds, most have been issued in the 1990's and 2000's and the interest paid on them is the yield of those bond at the time of issuing.
In fact the 30 year bonds that are maturing today have been issued exactly 30 years ago with a yield of almost 9%.
When they mature, they are rolled over in new bonds that -even if we had a small tick upwards in the last couple of years) - have a significantly lower interest of just over 2%.
The same holds for 10 year bonds which 10 years ago had a yield of 3-4% vs 2.6% today.
This effect is what caused the actual interest on debt (www.treasurydirect.gov) to not even double from 214 billion/year in 1988 to just 402 billion/year as recent as 2015 whilst the federal debt exploded over 20 fold from 900 billion to 19 trillion dollars.
However, all good stories must come to an end and this one is no different.
The bond market has been topping out for the better part of a decade now and yields have seen some upward momentum.
This has meant that a lot of treasury auctions saw the treasury forced to roll over their 5, 3 and 1 year bonds into new bonds with a higher yield than the old one.
Whilst the treasury can steer and man-oeuvre a little bit by opting to sell short term bonds when yields are high and long term bonds when yields are low there is ultimately no escape from market reality.
This has become clearly evident from the last prints of interest expenses on debt outstanding that have risen with 9.1% per year for the last 3 years and show now signs of abating with another 8.6% rise for the first five months of this financial year. This is in stark contrast with the 2.36% increase of the previous 27 years.
I would venture to guess that if nothing is done on a policy level to tackle the accumulating debt and rock the bond markets gently to sleep once more we will enter a spiral of increased debt issuance met with stable or declining demand which will push up yields which in turn will create the need of issuing more debt. This viscous circle will only end through a spectacular rise in the price of gold.
In a previous analysis I had already outlined a possible scenario of the 10 yr yield hitting its magnet level of 7% by 2025.
Given the current debt of 22 trillion, which is increasing at 1 trillion a year, it seems likely that by the start of 2025 we will be looking to a national debt in excess of 30 trillion dollar.
At a ratio of 1.8 for our gold reserve to interest expense on debt ratio we learn that the US gold reserve should be valued at 3.8 trillion dollars.
For this gold would need to rise to at least 14500 dollar.
If for some reason the debt markets stay irrational for a very long time before going in overdrive it could very well be that the US ends up with a 50 trillion dollar debt by 2035 when this scenario fully comes to fruition.
In such a scenario I see no reason to expect that the 10 yr yield would only stay limited to 7% but could easily hit the 1980 value of 13.5% again.
In order to calm the debt markets at these yields and these levels of debt gold would have to rise to about 45000 dollar to repeat the 1980 scenario.
Hold on to your horses.
Bitcoin: a gauge for asian risk toleranceSpread between Chinese and JGB's appears follow Bitcoin (usd) pretty well. As expected: bitcoin is the exact opposite of a portfolio hedge, and just a call option (like Tom Lee has made the case for) for growth. Interestingly enough, falling rates appear to stimulate selling and rising rates entice buying.
Yield explosionThe yield curve is still in a bear market.
Downward trending resistance at 3.1%
Once that is broken, it could easily go up to 7% which will act as a magnet due to it being a historical support line (1973-1992) and resistance (1992-2000).
This would be disastrous for the US government as interest on debt would rapidly rise.
More fundamental reasons of why the yield curve would go up is off course the US debt which is absurdly high.
There is no reason for lenders to keep lending at these low yields.
Russia stopped doing it and sold all US treasuries, China stopped doing it and now that the babyboomers are retiring they are stopping as a buyer as well.
Soon only the fed will be a buyer of these bonds.
Long term up is the only way to go for yields and the road is open until 7%.
This would cause a panic since the US will have it very difficult to service the debt without creating more bonds, enlarging the supply.
Very good news for gold (65% of the monetary reserve of the US) which could be doing extremely well just as it did in the 1970's
2820 - 2580 wide range in S&PUS tariffs on European cars are coming, retaliations will follow. Equities globally are starting to look very soft.
For now we trade within this range, plenty of opportunities to the downside with targets at 2580.
Best of luck.
US treasury yields triangle breakout (good for USD)Treasury yields look to be breaking out of a triangle pattern from LT support. Pullbacks could represent a chance to join move higher
USDRUB fundamentals and bond spread.Russian GDP annual growth rate is expected to come out February 1 with an increase of 0,70% from 1,50% to 2,20% while GDP in April is expected to fall into a 2,10% growth rate, Agricultural GDP is almost at 2017 levels, and will likely contribute to a stronger ruble. Manufacturing and construction GDP is also inching for a strong growth rate this year. Exports is at 2013 levels and have increased from January 2018 to November 2018 with 20,44%. Increases in export are expected to hold its momentum and increase throughout 2019, giving Russia a positive trade surplus. Higher oil prices is also contributing to the GDP growth. Consumer confidence is at -17.. While consumer spending is almost at its highest. Disposable income is at 0,10% and is expected to rise by 0,40% this year. Retail sales advanced 2,60% in 2018 compared with 1,30% increase in 2017. Retail sales is expected to rise modestly in 2019. Wages and living wages have increased in 2018. Unemployment rate is at historically lows since mid 2018.
Overall, i see Ruble to gain this year against the Dollar. Holding shorts, and will increase position when/if break of 64,400, 62,750, and 61,000 if we reach that far :) i will be looking at hedge opportunities.
Keep in mind that Russia is still a risky trade, with sanctions imposed from U.S. and Europe. So, the whole think could turn against me. But from the fundamental perspective, i see a bullish ruble.
TradingView does not provide data from RU10YT. But if you can find the data, then compare it with US10YT and you would see a that spreads are narrowing between those. This could indicate more demand for the Russian 10-year bond as the yield is decreasing.
US10Y - Bullish PatternUS10Y has just broken out of the downtrend and the inverted Head and Shoulders.
Cheers!
Gold shines with falling real yields This chart compares the real yield of 10 year Treasuries (bottom red) to XAUUSD (top). The real yield is the yield that a treasury buyer can expect to earn after inflation (nominal interest rate minus the inflation rate). At a glance there's visibly a strong negative correlation between real rates and the price of gold over time. Research by _Erb and Harvey showed a negative 82% correlation between real interest rates and gold prices from 1997 to 2012 (The Golden Dilemma).
The real yield on long term treasuries was over 3% in 2000 and fell to a negative yield in 2012-2013. During this period of time the price of gold gained over 600%. And in reverse from 2012 the real yield increased approximately 1% to 2015, while the price of gold fell almost 40% during this time.
Gold is relatively expensive when the real yield on treasuries is high, and relatively cheap when the real yield on treasuries is low. If an investor can gain a high real yield after inflation by holding a 'risk free' treasury, then the opportunity cost of holding gold is comparatively high. This makes gold relatively less attractive since gold pays neither dividend nor interest. Treasury investors lose money during negative interest rates (when inflation is greater than the nominal interest rate). This makes gold more attractive despite having no yield.
#FXinsights #TradingViewTOOLKIT Jan2019 \/Bonds /\Yields inFOCUSOriginal charts of these trades available at thinkorswimTOOLKIT.com with #TradingViewTOOKIT link
US10YR LONG YIELDS
Short @ 3.11 targeting Jan 2018 levels 2.55
NOW LONG BIAS from 2.55 with Key Levels, MarketDEPTH, and proMETRICS
Momentum Metric Reversal (thin histogram line with "The Great Gatsby" Alert and Cloud Oscillator) [ ] Price Action Metric Reversal is when the histogram column reverses higher than 2 bars previous at peak high /low
ZN1! SHORT 10yr NOTE
Short 122'22'0 / 121'12'0 TARGET LEVELS 121'11'0 121'19'0 119'26'0
Price Action Reversal SHORT with "The Great Gatsby" Alert signal [ ]
Momentum Metric Reversal (thin histogram line with "The Great Gatsby" Alert and Cloud Oscillator) [ ]
Yield spreads say more selling aheadDuring several previous liquidity crisis in 2001,2008,2012, 2016 the investment grade corporate yields spread over treasuries hit 200+ bps ... right now at an average spread of 150 basis points, may suggest more pain ahead before capitulation is reached. In other words investment grade corporate bond yields may be still too low. Based on what we've seen during several previous liquidity crisis the cost of borrowing in corporate credit may need to rise another 50 basis points before this is over.
Dow Jones Industrial tracking Oil and metals lower $YMDJIA is headed lower tracking investors rotation from stocks into 10yr T-bonds. I am seeing the index breaking down towards 22-21k.
Oil has already shed considerably and metals are trading lower too which effects Dow Jones Industrial sectors.
Technically we breached a weekly Insidebar to the downside and traded back which gives us an opportunity to get back into the downtrend on smaller timeframes.
$TYX YIELDS 30yr $USDJPY I will not be surprised if yields were creeping on 5% in the next 6 months.
Trigger should be obvious.
Please check out attached link
DE10Y / D1 : already showing signs of upward trending to come.We may show some short term demand on bonds because of equities volatility that I already expect. But I think anyway the EU bond market will remain under the bigger catalyst that this market will have to forecast new prices to settle to after ECB will pull out in december.
My trading plan here is to remain bullish on the december future expiration and buying all interesting pullbacks.
Hope this idea will inspire some of you !
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Phil
Risk Off? Treasury yields set to drop.I posted a while back that the "rising rate" mantra may not be as sure as most think.
To recap my view in brevity: Rates are up against a multi-decade long falling trend line, so it'll take more than a few sessions or weeks to overcome. I do believe that rates will be higher if you're looking out years or even decades, but shorter- to intermediate- term, the technical picture suggests rates are more likely to fall than rise.
This chart has a lot going on, so let me explain. First, we appear to have formed a head and shoulders top, and Friday's close was essentially right on the neckline. If that neckline gets broken, the downside target for TNX is at 23.19 (2.319%). That level nestles in comfortably between the 61.8% and 78.6% retracement levels of the swing from the lows in September to the highs this year.
Furthermore, there are two breakouts that remain untested. The first, or the "major" one, is around 26.00 (light red shaded area is the range). The second, or the "minor" one, lies just south of 25.00 (orange shaded area is range) and aligns with the aforementioned 61.8% retracement.
Also worth pointing out is the bearish divergence in the RSI's trend (white line) marked with the yellow circle. The MACD also confirms this trajectory lower (the other yellow circle).
In short, it looks like rates are headed back to 26.00 at a minimum, or more likely even further to the confluence of levels between 22.50-25.00.
Rising rate environment? Sure doesn't look that way to me...
(PS - I marked this as "short" because of the inverse relationship of bond prices and yields. So I'm bullish on bond prices, bearish on bond yields.)
Global-Review / May 28th : Waiting for VIX sellers to fail !Hope this idea will inspire some of you !
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Indicators used in this forecast are PRO Sinewave BETA & PRO Momentum .
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Kindly,
Phil
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