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US 10Y T-Note

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Fiscal Deficits, Interest Rates and the US Bond YieldThe US fiscal deficit for the fiscal year 2018 was just reported to have increased to $779 billion, or approximately 4% of GDP for the period. As Reuters notes, the deficit has been the largest reported since 2012, during a time when elections were coming up and the economy was still at a low interest rate environment and perhaps also in need for more government spending. It is known that bond traders keep a close eye on fiscal and monetary developments. In the latest post on Fiscal Policy, I have commented how interest rates affect government finances but I have left one important piece out of the equation: how Fiscal Deficits themselves affect bond yields. Overall, recall that higher interest rates, or even expectations of higher interest rates, cause bond yields to rise, given that investors demand higher compensation for their money as interest rates increase. This leads to raising the cost of borrowing for the government, which in turn leads to higher deficits, all else equal. Naturally, it could most likely be the case that interest rates have increased because of improved economic conditions and hence more taxes will be flowing in to cover for the raise in the bond yield. Another important point is that fiscal deficits tend to also increase bond yields simply because there is more debt running for the same amount of investor funds. As such, investors can potentially gain higher compensation as demand for their funds has increased. Furthermore, the higher the deficit, the more unlikely it is that the state will remain able to meet its repayments. Consequently, higher, persistent deficits are indicative of higher risk in the economy as potential fiscal actions would need to be taken in the future, i.e. increases in taxation or spending cuts. This surge in non-payment risk is bound to increase yields as well. In the case of the US, the current situation is indicative of both happening at the same time: the government keeps maintaining a large fiscal deficit and the Federal Reserve is on a bout of interest rate increases which should not end soon. The policy-important question is what happens to the economy when the government is forced to slash spending or increase taxation in order to maintain a sustainable fiscal position. As studies have shown, drops in spending can result to approximately one-for-one reductions in the GDP growth rate, although this effect is mostly observed in periods of recession. Still, in the US case, even a 0.5% drop in GDP growth for a 1% reduction in government spending could have important effects on its growth potentials, especially if it also constraints fiscal space during a recession. The US bond yield has been reflecting these developments as its price has been declining, which suggests that the bond yield is increasing. In fact, the combination of the two effects has sent the yield at more than 3% in September, for the first time since 2011. Dr Nektarios Michail Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
UEducation
by HotForex
Short 10 years Treasury: 10 years yield should continue to go upThe very first thing that I want to point out is, this is a weekly chart. That means, it may not be trade-able. But you can always use it for portfolio management and adjustment. Note that the 10 years is the most important instrument in the world as it is the risk-free rate used by many major funds. Thus it has major implications to other asset classes including equities, forex and precious metals just to name a few. In fact, I wouldn't be surprised if all asset classes are affected by it (but I don't trade them long enough to be sure). Anyhow, according to my Elliott Waves analysis, I believe that the yield is coming to continue going up (drop in price) with the short-term (in weekly sense) as shown on the horizontal line. Then it should bounce a bit to form a corrective structure before continuing down in terms of price (up in yield).
UShort
by sngyuchao
US 10Y T-NOTE -> COMING CLOSE TO A MAJOR TURNING POINT?Still cannot know whether the underlying asset will be turning from the 1.382 / .50 or the 1.618 / .618 but there is a strong confluence on both levels which makes me believe that one of them which prove to be a a key reversal point. Also judging by the strong correlation between 10-Y yields and the DXY which is also nearing a major reversal point we could in effect anticipate a similar behavior on both, of one confirming the other. For risk and money management purposes, always determine a max. of 2% risk on every trade. For example on a $50,000 account, this would be equivalent to 1,25 Lots with an 80 pip stop loss. Targets and closure of positions may be subject to alteration throughout the course of the trade. This is due to the ever-changing and unpredictable nature of the market. This post is set to be used and serve as an example and in an educational manner and is not to be taken as direct investment advice.
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by Aqua_Trader
10y Note is pulling back!!Hey guys Hope you guys are having fantastic week. I have not posted in a while. I took some time off charts to reset my brain. This is the last quarter. Actually there are only 2 more months of active trading till december holidays. There are few setups getting ready. I will be posting as they emerge. Most of the DXY pairs are at weekly support levels. We have to wait and see for now. Let's take a look at US bonds. Weekly is bearish. Price is below Tenkan and Kijun. Macd is crossed down. Chikou is coming into past candles. Daily is bouncing from the highlighted support level. I expected that as it was at support and swing wide from Kijun sen. Daily macd is crossed up. I am only looking to short it. I am not going to guess it how deep the pullback will be. Let the price action give me a proper signal and i will be in. Looking for test of lower support level once this one goes. Keep an eye on it if you trade it . Thanks for the read. Hit like if you like my post . I will post some more setups as they come Take care.
UShort
by xChampi0nx
2
US 10 Year Bond is testing it's daily uptrend line and supportI posted this as neutral because it can go either way from here. I bought TYO in my 401k two days ago and shorted the future yesterday. For those who are short, this is a take profit area if support holds. I will put a tight stop loss here. A long position can be taken here depending on the price action. If it breaks support and the uptrend line, short at an appropriate time. usb10yusd -0.25% usually falls with dxy 0.14% strength. Caution: These leveraged etfs are low volume which affects entry and exit prices and liquidity.
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by haug01