US02Y trade ideas
$USDJPY Is Savaged, Hammered Over 3%FX turmoil early in the evening session with the AUDUSD falling to .6750, USDJPY falling through 105 and USDTRY blasting through 5.6.
EURUSD and GBPUSD are taking some heat, too, in what is being explained as carry trades being unwound as market participants are finally getting the gist: growth and inflation are slowing.
In my previous post, my intermediate TACVOL range was114.44/108.30. Price action had been unable to break above the range top, and now completely falling through the bottom. I would like this move play out before jumping in.
However, if you've read my work, I been trying to prepare readers for the epic shift.
If we look towards US/Japan rate differentials, USDJPY is suggesting US yields have much more to fall.
This was the largest rate of change move since 2017.
Current TACVOL range 115.54/108.87; -2.81 score suggesting a pull back is in order at least near-term.
US02Y/US05Y RATIO INDEXThis ratio shows us that we are in a beginning period for going below 1, in that case this is the first signal, and is the following one US02Y/US10Y will go in the same direction, recession will begin.
thank for this last one
Possible Recession comparison US02 yield 5 and 10 yearsI think that, It is in action a possible regression market where bit investor are more interested in long term 10 years that in 2 one.
This means that on the contrary, one dollar tomorrow are better than a dollar today, this is real on opposite meaning regarding the contrary one where thanks to inflaction and many different economical situation, a dollar today was always better than a dollar tomorrow.
Anyway follow my next chart where a comparison between US yield treasury with 2 and 5 years show us a real ratio below 1, this mean that this recession power limit is in act to beginnig
First of all after last 10 years of history in Central bank economical situation, we can consider this first signal a prediction considered a previous feedback but when spread US02Y/US10Y will inverted and will go in negative range we'll have a real signal and confirmation about real recession and when this event had realized it anticipates the recession and it will be bigger than 20s period of 20th century
Thanks for what my thoughts
Bond yeilds and Market TargetNotes on chart, but in short... I'm looking at the idea that if the 2/10 yield doesn't invert then a target of about 245-250ish area by Jan/Feb of 2019. If we do carry over for inversion on the 2/10 I'm looking longer term of roughly Sept. of 2020 as target for bottom of around 138-155. Just my thoughts and please let me know what think.
US Yield curve... clock is tickingHope this idea will inspire some of you !
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US2Y with DXY - moving togetherSince the begining of the rise in 2 year yield, USD was following closely. However, USD did not follow rates to new high, but diverged instead. Note that the momentum in 2y yield is slowing, which could portend fall in interest rates in not very distant future, which could in turn hurt USD.
The US02y a boon for equity bulls
The early month of October began with a myriad of experiences when the equity market went leaching in the red after a break from the long bull run since February. The DJI shed more than 600 points in a single session as risk-on mode eroded unconventionally as investors sought catalysts that precipitated the downfall. The sneeze that began in the US gave a cold to the entire world and for 2 respective days multi assets globally were on a downside spiral. What lingers in many traders minds is how comes that move was not anticipated? and what lessons do we juice out from this new norm of flash crashes? The US02Y has formed technical structures that unravel this conundrum. The FED rapid rate hikes which positively correlate with the US02Y are about to come into a halt as the wedge structural breakout is likely to consolidate after an impressive 5 year bull run as the tightening phase of the business cycle comes to an end. On the other hand, more inflows on equities will pour down as investors urge for risk grows due to the change in monetary policy . Nevertheless, a recession cant be ruled out of the table as the US-China trade war simmers there in derailing the health of the global economy and induce fear across assets all over the world if a resolution wont be met.
US02Y isn't playingDo not forget Yields are nothing other than yield to maturity and pre-tax based on the ask side of the market and is not messing around!
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The 2y yield at 3% is more important than the 10y yield at 3%...Charting the LOG of the US 2y yield (blue line) compared to that of the US 10y yield (red line) here shows the heavy move up in the 2y compared to the 10y. This, in my opinion, is very important because a 2y yield at or above 3% will likely drive short-medium term market reaction.
Some of my thoughts on the 2y, 5y, and 10y points of the curve for context:
• The timing of a hike primarily drives the 2y yield (or 1y spot compounded by 1y1y) while the pace of hikes drives the 3y yield (2y spot compounded by 2y1y) and 5y yield (3y yield compounded by 3y1y and 4y1y).
• If you hike sooner then you don’t need such a fast pace of hiking (flatter 2y5y). Conversely, if you wait too long, then you have to increase the pace to catch up (steeper 2y5y)
• The 10 year yield is the ultimate benchmark for the bond market or anyone quoting or looking at rates. Key drivers such as inflation, wages, GDP and market risk on/off sentiment drive this part of the curve.
While we have certainly seen a decent back up in US 10y yields, looking at the trajectory of the US 2y is probably more important. Why? The short-end has immediate effects on borrowing and lending and when the 2y level is currently near 2.5% that has to be a cause for some concern for tighter financial conditions and more expensive credit.
Looking at the LOG trend-line for both the 2y and 10y, if the current momentum and pace continues, then the 2y yield should likely meet the 10y yield sometime towards fall of 2018 i.e. a flat 2s10s curve and a 2y yield above 3% - my point is the 10y above 3% won't be the risk-off indicator, the 2y above 3% will be.
German 2y Yield to go higher (US2Y vs GE2Y yield sprd too wide?)US 2y yield (blue line) vs GER 2y yield (red line)...The spread is immensely wide as the FED has been in a hiking phase wile the ECB still continues to apply a "whatever-it-takes policy".
Eventually the ECB policy will have to roll back and front-end yields will react by backing up.
I believe the German 2y yield will eventually move higher and lead the narrowing of the US-GER 2y spread gap.
This also makes the case for a Eurozone (i.e. German) curve flattener attractive at these levels.
US Government Bonds getting hotUS Bonds getting hot, not boring at all. Here 2, 5 and 10 Yr Yield comparison.
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Verifying the consolidation; USDJPY, CPI and US GOVT. 2Y YIELDSThe Chart is of the 2y Govt. Bond yields which is positively correlated to the CPI and to the USDJPY pair, with correlation coefficient of >0.8. This is because, inflation is directly related to debt and investment yields and Japan is the second largest US debtor. All three charts are consolidating which would mean that there's still a fog of uncertainty into the future of the greenback. A new administration, the Yen's unresponsiveness to stimulus and a US inflation of 2.4 are all contributing factors.
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This sell signal means: buy US2y vs sell SchatzBuy the US/German 2y bond spread!
Shd the Schatz yield itself retest the -0,72/-0,78 range again, then it will likely be an outright sell too! (pls see lower panel referring to German 2y yield)
