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US Government Bonds 2 YR YieldUS Government Bonds 2 YR YieldUS Government Bonds 2 YR Yield

US Government Bonds 2 YR Yield

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US02Y trade ideas

How to position for yield curve un-inversions!It has been some time since we delved into the intricate world of interest rates and their prospective trajectories. With the yield curve experiencing significant movement in recent weeks, it's high time we reassess our stance. Following a staggering 500 basis points increase, we now find ourselves potentially nearer to the end of the rate hike cycle than ever before. The recent hawkish pause announced in the last meeting has left market participants on tenterhooks, pondering the future course of action in the ongoing battle against inflation. Given the downward trend in inflation and the possibility of at least one more rate hike, 'real' yields have ascended beyond the 0% level, as depicted in the chart above. Since the 2010s, real yields have consistently struggled to surpass the 1.2% level. However, the recent lower inflation prints place the 'real' yield at a new decade high of 1.25%. So, how does the yield curve inversion behave during periods of real yields? Interestingly, in three of the past four instances, the curve 'un-inverted' once real yields exceeded 0. Of greater significance is the yield curve's response after the Fed cuts rates. Since 1989, this has been a key signal of the yield curve un-inversion. Given this event's proximity and the current 2Y-10Y yield curve, we contemplate the optimal strategy to capitalize on this likely un-inversion. One approach is to examine all possible inversion combinations between the 2, 5, 10, and 30-year yields. All these combinations present an inverted curve, except for the 10Y-30Y segment. Upon dissecting the analysis to focus solely on 2-year inversions, we observe the following: The 2-year inversion is generally the steepest, with the 2Y-10Y ranking as the most inverted segment of the yield curve. All inversions anchored with the 2Y are at their all-time highs, plunging us into uncharted waters. In contrast, the 5-year and 10-year yields exhibit more subdued movements. Their inversions have yet to reach all-time highs, and the overall range of movement is relatively restrained. Therefore, to maximize returns on the un-inversion move, one could position to short either the most inverted section of the curve, the 2Y-10Y, or the 2Y-30Y, which typically experiences the largest movement upon un-inversion. Handily, CME has the Micro Treasury Yield Futures, quoted in yield terms, which allows us to express this view in a straightforward manner allaying the complications with DV01 calculation. By creating a short yield spread position, we are not merely speculating on the direction of individual yields but rather on the relative movement between them. Trading the yield spread instead of just an outright position in a single part of the curve also protects us from parallel shifts in the yield curve, especially in volatile times like these. This strategy takes advantage of the yield curve dynamics, particularly the inversion trend we've been observing. We create the short yield spread position by taking a short position in the Micro 2-Yr Yield Futures and a long position in the Micro 10-Yr Yield Futures or Micro 30-Yr Yield Futures to express the curve un-inversion view, with 1 basis point move equal to 10 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com www.cmegroup.com
TVC:US02YShort
by inspirante
FOMC nothing to see hereFOMC has raised interest rates for 9 times in a row. The next Fed interest rate decision will be publicly announced on Wednesday 5/3/23 at 2pm. The market consensus is expecting FOMC to raise interest rates for the 10th time in a row. FOMC rate hikes: 3/16/22 +0.25% = 0.50% 5/4/22 +0.50% = 1.00% 6/15/22 +0.75% = 1.75% 7/27/22 +0.75% = 2.50% 9/21/22 +0.75% = 3.25% 11/2/22 +0.75% = 4.00% 12/14/22 +0.50% = 4.50% 2/1/23 +0.25% = 4.75% 3/22/23 +0.25% = 5.00% 5/3/23 +0.25% = 5.25% The collapses of First Republic Bank, Silicon Valley Bank and Signature Bank were the second, third and fourth largest bank failures in the history of the United States. The collapse of Washington Mutual during the 2007–2008 financial crisis was the largest. On July 6th 2022, the 2s / 10s yield curve inverted, and it has widened its gap since then. An inversion of the 2-year, 10-year part of the curve is viewed by many as a reliable signal that a recession is likely to follow in one to two years.
TVC:US02Y
by Options360
2
2 yr yield risingBanks reported profits, bank fears are gone, yields rising, lol. Aside from my index futures indicators (which predicted a red day anyways), rising yields are causing the market to drop. The whole pump this week was about "disinflation", but yields were down on bank fears so now the reverse play, lol. Gold and cryptos down along with everything besides financials, lol. Makes sense if you think about it, but not something I would have predicted. These bond yield adjustments usually take a couple of days, so bearish for Monday
TVC:US02Y
by hungry_hippo