Could Italian BTP Yields Catch Up With Bunds & US?Short 10 Year Italian BTP Futures as a hedge and catch up play with U.S. treasury and German Bund Yields.
Yields
US 10 YEAR YIELDS ****EM TRADERS!!!!US Generic 10 yr yields took a leap towards the reverse h&s neckline, 2.60% is the key level the watch.
if yields breach above 2.60 music stops for the long EM trades for the short term!
hedge longs especially fragile 5s ccy and bonds
Yield Curve Continues to FallAs investors price in lower inflation and increased expectations for a Fed rate hike, the yield curve (between the 30 year bond and the two year note) is continuously making new lows. Typically, the flattening or steepening of the yield curve is led by one end, but in this case, both appear to be contributing equally. This presents a problem for the Fed as raising rates (or more hawkish rhetoric) could hurl the yield curve closer to negative territory.
We can see the spread has been hugging the lower bound of the Kovach Reversals Indicator for some time, which is an extremely bearish sign. Also, the slope of the spread has become increasingly more negative.
If you want access to the Kovach Reversals indicator and more, check out quantguy.net.
China vs US 10Y Yields China 10y yields lead US yields
When spread is outside of BB, US yields should move in the coming weeks.
Also, China 10Y yields track Copper prices
Source: www.mcoscillator.com
US Yield Curve ( 2 minus 10 year ) and some COT analysis US Yield Curve ( 2 minus 10 year ) - Commitment of Traders - Futures Only - Percent of Open Interest - Legacy Format - Calculation of
10 year Non Commercial Longs minus Non Commercial Shorts with sum of 2 year Non Commercial Longs minus Non Commercial Shorts
A sick market - China 10 year bonds future marketToday let's look at the China 10 year bonds future market.
As the most important market of controlling the inflation , those "jigou" ( securities company hedging manager in Chinese) are buying this market into Renminbi interests lower which is canceling the 13th. March hike. This has caused 3 months inflation lower in China till the June. ( maybe they're saving their ass from the buying failure in 2016)
There's a system bug between "zhengjianhui" ( China Securities Regulatory Commission in Chinese) and the PBOC as an administration absence in China 10 year bonds future market.
This market has no administration, crazy...
I here urge the China authorities assembling a super administration bank like the U.K or the USA as soon as possible. With a new rising cycle beginning those bugs could damage the safety of financial system in the future
10 Year T-Note Futures: Uptrend in motionWe have a strong uptrend signal in treasury notes and potential for a big upside move. I'm currently long $TMF, as my proxy for this move, since $TLT was lower than 10 Year Note futures, offering a more interesting risk/reward (as per Tim West's posts). Right now, I think the move to the upside is confirmed, so, if you're not in, you could look into buying either instrument on dips. Stop losses can be tight, but you're better off without one, and simply adjusting size based on volatility (1-3 times the daily ATR -11 periods- for your 'stop' distance, and thus size to fit your risk criteria).
Good luck,
Ivan Labrie.
Treasury Yields Surge but the Dollar Stays PutOver supply from the auctions should keep treasury yields rising to test the high @ 2.65 on the 10yr. Bills and 7yr being auctioned tomorrow should continue to fuel the Dow higher. $DXY might follow yields to 102 forming a right shoulder depending on the data tomorrow and Friday.
Economic cycle, market cycle, interest rates, trend lines & SPXThis chart provides probable market behavior given current market behavior, interest rates, and other factors such as presidential elections.
www.tradingview.com
I am expecting a down turn during the next week which would last until late February and another leg up in SPX until the final move down in August 2017.
Trend line colors mark the same conditions on both cycles.
long US10 @ 15 min @ trading capability for this 52nd week `16This is only a trading capability - no recommendation !!!
Next week i`ll confirm or change my opinion about this SetUp :)
Buying/Selling or even only watching is always your own responsibility ...
Best regards
Aaron
US 10-yr yield – rally overdone or more to come?The global benchmark for the rates – the US 10-year Treasury yield has rallied this month from 1.77% to a high of 2.417%.
Such a sharp rise in yields in such a short period of time is undesirable since the world is awash with debt…as noted by Nicole Elliot on yesterday’s Finance show
Marc Ostwald, Strategist at ADMISI also noted the sharp spike is overdone on today’s Finance show. However, he also makes an important point – The rise in yields is not only due to Trump Bump and the resulting rise in Fed rate hike bets, but also due to the fact that China and Gulf nations are liquidating their treasury holdings.
Coming to technicals – Monthly chart
The yield has retraced 23.6% of the drop from 2006 high to 2016 low. The Fibo level is 2.269%.
We also see a bullish break from the falling channel.
Furthermore, the monthly 50-MA appears to have bottomed out.
To me, technicals suggest the yield has bottomed out. Agreed that the spike is overdone and technical correction is likely. However, the yield may have made a long-term bottom.
UK 10-yr Gilt – Weekly 5-MA could be put to testGilt’s daily close above 127.23 (23.6% Fibo retracement) on Monday if followed by a move back above resistance at 127.63 could yield a rally to weekly 5-MA level of 128.03 – 128.22 (38.2% Fibo).
On the lower side, failure to hold above 127.23 followed by a break below 126.42 (Oct 20 low) would open doors for a re-test of 125.63 (Oct 17 low).
UK 10-yr Gilt – Stuck at 23.6% FiboRebound from the low of 125.627 on the back of a bullish price RSI divergence and a bullish MACD crossover has run into resistance at 127.23, which is 23.6% Fibo resistance of the sell-off from 132.424-125.627.
Given the bullish divergence on the 4-hr and bullish pin bar on the daily chart the odds of a break above 127.23 and a rise to 128.00 are high.
Only a failure at 127.23 followed by a break below 126.37 would signal loss of bullish momentum.
UK 10-yr Gilts – Short-term bottom in placeBullish price RSI divergence on 4-hr chart followed by a rise to 127.00 levels suggests a retreat from Sep 27 high of 131.94 may have run out of steam and prices could rally further if the hurdle at 127.39 (Falling trend line + 23.6% Fibo) is breached.
On the lower side, only a break below 125.84 would signal fresh sell-off.
German 10-yr Bunds at key support, bullish divergence on intradaGerman 10-yr Bund prices dropped to rising trend line support coming from June low and July low.
Prices are attempting a rebound form the rising trend line support and the odds of a solid rebound are high, if we take into consideration the bullish price RSI divergence on the hourly and 4-hr chart. Even the MACD is suggesting the bearish momentum has run out of steam.
Possible rebound in Bund (drop in yields) suggests we may be in for a more pronounced bout of risk aversion in the financial markets.
STERLING - A HIGHER GBP EQUILIBRIUM: BREXIT, DATA, VOL, RATES GBP moving higher?
Data:
1. Leading post brexit data has recovered significantly from 5-10yr lows to firm growth or significant recovery (PMI, Optimism, Confidence) and imo this will be continuing theme given negs arent going to start for another 6-9m, there isnt any impetus to drive us lower again.
2. Also the macro indicators are trading well, e.g. Inflation, employment and GDP are all firm, assuming this continues further BOE action will be impossible & general sterling selling will struggle.
Negotiations:
1. EU Exports equal 50% of total exports whilst total exports equal 10% of GDP, so even if we lost all EU exports GDP would only fall by 1% given imports are marginally less than exports thus the cost of losing EU trade is offsetted, its not all one way. UK Domestic demand would pick up the EU import slack so likely only 1% to GDP to be lost.
- That is the absolutely worst option. In reality we know negotiations will only realistically lead to at worst international trade inefficiencies e.g. duties/ taxes, which will likely have a less then 0.1% effect on GDP. The EU isnt going to cut all ties.
- Also from this point, and GBP 10-20% lower uncertainty is priced so further downside from uncertainty is hard to justify unless we get new political stimulus which is unlikely given how quiet it has been to date. So risks here look to be to the upside e.g. uncertainty/ complacency fading meaning confidence/ optimism rises in the near term (even if wrongly), which sees GBP wash off some of this "gap" and move to a new near term equilibrium.
GBP price action:
1. STG crosses have lost 2-4000pips or more in the past 6m, so is relatively very undervalued, thus a 500-1000pip rebalancing higher wouldnt be uncalled for or even relatively aggressive.
2. Topside is also supported by the price action we have seen post brexit, apart from the initial brexit losses, any further downside (weak PMI, BOE easing etc) GBP has failed to hold the lows of the range OR even trade at the lower percentiles for any particular amount of time - we havent seen a new equilibrium lower in sterling weve remained rangebound with a topside skew. We have seen GBP brought quite aggressively on dips, and on reflection, it has actually paid to be a buyer on dips vs a seller on rallies from a risk perspective. Being a bear myself, I know it has been an upward battle to gain any consistent downside, all structural shorts have turned into tactical positions with early profit taking e.g. short GBPUSD for 1.25 was cut early at 1.29 when the bulls faded the move lower. This theme has been consistent despite BOE Easing and strong fwd guidance, with flimsy data.
3. The past week MA i think is much closer to where we will see GBP trade in the future vs the 1m MA at 1.319.. 1.334 on the weekly is where i feel we will find the next months average.
STERLING - A HIGHER GBP EQUILIBRIUM: BREXIT, DATA, VOL, RATESGBP moving higher?
Data:
1. Leading post brexit data has recovered significantly from 5-10yr lows to firm growth or significant recovery (PMI, Optimism, Confidence) and imo this will be continuing theme given negs arent going to start for another 6-9m, there isnt any impetus to drive us lower again.
2. Also the macro indicators are trading well, e.g. Inflation, employment and GDP are all firm, assuming this continues further BOE action will be impossible & general sterling selling will struggle.
Negotiations:
1. EU Exports equal 50% of total exports whilst total exports equal 10% of GDP, so even if we lost all EU exports GDP would only fall by 1% given imports are marginally less than exports thus the cost of losing EU trade is offsetted, its not all one way. UK Domestic demand would pick up the EU import slack so likely only 1% to GDP to be lost.
- That is the absolutely worst option. In reality we know negotiations will only realistically lead to at worst international trade inefficiencies e.g. duties/ taxes, which will likely have a less then 0.1% effect on GDP. The EU isnt going to cut all ties.
- Also from this point, and GBP 10-20% lower uncertainty is priced so further downside from uncertainty is hard to justify unless we get new political stimulus which is unlikely given how quiet it has been to date. So risks here look to be to the upside e.g. uncertainty/ complacency fading meaning confidence/ optimism rises in the near term (even if wrongly), which sees GBP wash off some of this "gap" and move to a new near term equilibrium.
GBP price action:
1. STG crosses have lost 2-4000pips or more in the past 6m, so is relatively very undervalued, thus a 500-1000pip rebalancing higher wouldnt be uncalled for or even relatively aggressive.
2. Topside is also supported by the price action we have seen post brexit, apart from the initial brexit losses, any further downside (weak PMI, BOE easing etc) GBP has failed to hold the lows of the range OR even trade at the lower percentiles for any particular amount of time - we havent seen a new equilibrium lower in sterling weve remained rangebound with a topside skew. We have seen GBP brought quite aggressively on dips, and on reflection, it has actually paid to be a buyer on dips vs a seller on rallies from a risk perspective. Being a bear myself, I know it has been an upward battle to gain any consistent downside, all structural shorts have turned into tactical positions with early profit taking e.g. short GBPUSD for 1.25 was cut early at 1.29 when the bulls faded the move lower. This theme has been consistent despite BOE Easing and strong fwd guidance, with flimsy data.
3. The past week MA i think is much closer to where we will see GBP trade in the future vs the 1m MA at 1.319.. 1.334 on the weekly is where i feel we will find the next months average.
Gold oversold intraday but continuing correction towards 1297The 1327 retracement level has been breached today following the sustained bounce in 10 year yields. Although the market is looking oversold intraday, I expect the correction to continue to potentially as low as 1297 before becoming attractive again from the long side.
I remain bullish on gold medium and long term (as I have been all year) with a year-end price target of $1400-1425 following a correction. In the short term over the coming quarter I would not be surprised to see gold contained within a 100 point range of $1300-1400, presenting an attractive risk/reward skew for longs.
US 10-yr yield Bearish Cypher, what it means for markets?About 5 days ago, I had pointed to the possible Bearish Cypher formation on the 10-yr treasury yield . The pattern stands completed today.
Point D = 1.499% = potential reversal zone (PRZ) has been tested. As per the pattern, we should be heading down from here. For related markets this means -
US stocks may be in for correction
USD/JPY rally could run out of steam if treasury yields slips from PRZ
US 10-yr treasury yield – Bearish Cypher set upThe hourly chart shows bullish price RSI divergence led to the recovery in the yield from the record low of 1.322%.
We also have a bearish cipher set up, courtesy of the recovery from record low.
Point D, which is the potential reversal zone, stands at 1.499%. This means the yield could turn lower from 1.499% or if the level is breached on the higher side on daily closing basis, we may be in for a rally to 1.59%.
Breach of 1.499% on the higher side appears likely if the non-farm payrolls report beats consensus estimates and wage growth numbers spike.
Otherwise, yield is more likely to reverse from Point D = 1.499%.
Symmetric triangle on 10Y US TreasuriesJust about hitting a support level on the symmetric triangle.
Fundamentally, the global markets are going through a rough time this week, which could drive demand for haven assets such as 10Y treasuries, driving the price up to hit the resistance level of this triangle. I think that we will see a short-term move up to the resistance.
Look for breaks on both sides, however.
