Tracking the yield curve disinversionRed line above green line means the disinversion has occurred. When green line above red line it means the 2yr is still paying higher interest than the 10yr
US10Y trade ideas
SPX on upper valuation band in a rising yield environment.The top chart shows the US 10 Year government bond yield. We are currently in a rising yield environment.
The bottom chart shows that the SPX is at the upper channel and there is a risk of a significant drop in SPX in the coming years.
The middle chart shows the ratio of Gold/SPX. Gold has been underperforming but there are 5 to 10 year periods of gold outperformance over SPX.
US10Y - Playing With New Week Opening GapsWith Sellside delivering, the expectation was for a retracement to target the previous weeks trading range which never came to fruition.
Instead, Thursday delivered into a Sellside imbalance buyside inefficiency, failing to reach into the NWOG, indicating signs of weakness before Friday came about and delivered a bearish inside day candle.
I believe there is unfinished business down at 3.763%. I have my eyes on the 25% quadrants within the volume imbalance
10 YR Holding ToughThe 10 Yr Treasury is still struggling with that 3.8%ish level. We are likely in a sideways pattern for a few weeks until we get some economic data that can move the markets. There was a nice Death cross of the 50 EMA over the 200 EMA so it is looking more promising!
US10Y - Equilibrium In The MakingsAlthough we have seen 5 consecutive days of bullish price action, the overall trend of the market is bearish. With this being the case, my projections to the upside is limited with 3.947% next in the cards and 3.980% EQ being the main point of interest
US 10Y TREASURY: adjusting for a rate cutAfter Powell`s the “time has come” for the Fed to pivot, and the latest PCE data, markets were adjusting their expectations for the level of Fed's rate cuts in the coming period. The Julys PCE data came surprisingly lower from market expectations, of 2.5% on a yearly basis, compared to 2.6% expected by markets. At the same time, investors are considering both personal income, which was higher by 0.3% in July, and personal spending which was higher by 0.5% for the month. The 10Y treasury yields started the previous week around 3.78%, however, they are ending it at 3.90%. Highest weekly level was 3.92% on one occasion.
The week ahead might also trigger higher volatility. The Non-farm Payrolls and Unemployment Rate for August are scheduled for a release, where any surprises might induce higher market moves. However, at the current point, there is some probability that the level of 4.0% might be tested, but not higher grounds. There is also a potential for a short reversal, but not too lower from current levels.
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Yield Curve Inversion: A Warning Sign You Can't IgnoreThe yield curve, which shows the difference between short-term and long-term interest rates on government bonds (US10Y-US02Y). In normal market conditions, this number should be positive because the interest that investors require on 10Y bonds is higher than the interest required on 2Y bonds. Interest is a value of risk perception. Higher risk of default means higher required interest on bonds.
As seen on the chart, the moment that the yield-curve "un-inverts" (yellow circles) is a critical market indicator that can often predict upcoming recessions.
In the last 35 years, the un-inversion has always preceded a dump in stock prices and a recession.
Seeing this chart, it's not too far-fetched to assume that the world will go into a recession at some point in the next 1-2 years.
Yield Curve De-Inverting: A Bearish September IndicatorFlying under the radar for much of this month is the spread between the yield on the US 2-year Treasury note and the 10-year note. The gap is now just five basis points, having traded at negative 0.5ppt as recently as June 25. As we enter September, notoriously the worst month on the calendar for the S&P 500, if we see short rates continue to fall while the 10-year holds steady, I assert that it would be a bearish indicator for the S&P 500.
Here’s how it might play out: if we see a weak payroll report on Friday, September 6, then chances are bad news will be seen as bad news, resulting in a flight to safety in the Treasury market. Of course, intermediate-term notes could see significant upside pressure, leading to a drop in the 10-year. The next key report following the August NFP update is the CPI report later in September. After today’s in-line PCE numbers, there should be a firm beat on where inflation stands.
Now that earnings season is over, the focus will turn back to the macro. Considering that the Citigroup Economic Surprise Index remains sharply in the red, we need to see better economic data to help support the growth narrative looking ahead. Sure, the Q2 second update on US real GDP growth was solid, and the Q3 tracking numbers are sanguine, but the market will be forward-looking.
So, keep your eye on the 2s10s spread—a yield curve disinversion during this spooky seasonal stretch could bring about volatility.
10/2 Yield Disinversion This WeekIt looks like we may finally see the 10/2 yield disinversion happen this week in the US bond market, ahead of the Sept 6th Unemployment Rate and the Sept 18th Federal Reserve rate cuts
US 10Y TREASURY: “time has come” for 25 or 50 bps?The “time has come” for the Fed to pivot. This was the note from Fed Chair Powell at the Wyoming Jackson Hole Symposium, and was the note that the market was waiting for a long time to hear. Current market expectation is that the Fed will make its first cut in September, however, the question that is currently occupying Wall Street is whether it is going to be 25 or 50 basis points? Fed Chair Powell did not make any comments on when the rate cut will happen or what would be the scale of the rate cut.
The 10Y Treasury benchmark started the week around the level of 3,9%, and ended it at 3,79%. The market has priced the first rate cut in the coming period, as announced by Powell. During the week ahead, there might be some lower volatility between 3,8% and 3,9%, however, on a long run, the yields will certainly eye the downside.
US10Y - Downside Delivery Has Been ConfirmedA couple weeks back, i was expecting a run below the monthly Sellside liquidity pool which occurred. Well, call it a gap as market gapped below to create a low @ 3.667% before retracing 50% into the previous weeks midpoint.
It's looking like a scalpers market going into next week so those trading yields need to be nimble.
My bias is bullish but narrative incorporates bearish observation.
4.197% might seem optimistic but in the grand scheme of the macro dealing range, it could be deemed as a short term high with a greater chance of yielding shorts down into the monthly OB and weekly BISI.
August to September - Where are we? Where can we go?Looking into the market for this week. Just guestimates for the macro directions but will be taking intra-day moves where they permit
US10Y going lower with the Fed having no choice but to cut.Almost 10 months ago (November 7 2023, see chart below), we made a bold (for the time being) call on the U.S. Government Bonds 10YR Yield (US10Y), as against the prevailing market sentiment we gave a sell signal, right after what turned out to be a top:
Today's revisit to this pattern shows that the 1M RSI Lower Highs have already started to form a Bearish Reversal on the US10Y price, similar to 2006 - 2007. We are expecting to hit the 0.382 Fibonacci retracement level at 2.100% as its first Target, on the Fed's first wave of rate cutting and gradually hit the lower Fib targets as the rates stabilize.
For better illustration we have plotted also the U.S. Interest Rate (red trend-line), where you can clearly see that the fractal we compare to today, is right before cuts started in August 2007. Also it is a natural consequence of US10Y falling when rate cut cycles start, evident also in June 2019, December 2000, May 1995, May 1989 September 1984, May 1981 etc.
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bond yield vs copper gold and oil.... US 10 year bond yield vs copper gold ratio and oil.... a meaningful intermarket link ....
us10Y Mallicast analysisThe U.S. 10-year Treasury bonds, given their significant importance, are currently rising, which indicates a potential economic recession and an imminent decline in durable goods such as gold. We predict this growth to continue until it reaches 5.289%.
US10Y Mallicast analysisThe U.S. 10-year Treasury bonds, given their significant importance, are currently rising, which indicates a potential economic recession and an imminent decline in durable goods such as gold. We predict this growth to continue until it reaches 5.289%.
ELLIOTT WAVE ANALYSIS: US10YR - 20 AUG, 2024© Master of Elliott Wave : Hua (Shane) Cuong, CEWA-M.
10-Year Yield, the main trend is down. Currently wave (C)-orange is unfolding to push lower. Recent price action shows that wave ((iii))-navy has ended, and wave ((iv))-navy is unfolding as a Triangle. The basis is that it will be longer and take longer than expected. But the bearish view with wave ((v))-navy then is still holding.
While price must remain below the 4.022% high to hold this view.
US 10Y TREASURY: Fed`s cut is nearingThe posted US inflation for July brought some new confidence for investors that the Fed's rate cut is nearing. The July inflation eased to the level of 2.9% on a yearly basis, and was below market forecast of 3.0%. The Producers Price Index was another indicator which pointed to further easing of inflation pressures, by reaching 0.1% in July, for the month, again below market estimate of 0.2%. To nail the market expectations, preliminary Michigan Consumer Sentiment, posted on Friday, showed no change in inflation expectations for the five years period of 3.0%. This was enough information for the market participants to increase their expectations that the Fed might make their first rate cut in September.
The 10Y US Treasuries started the week modestly below the level of 4.0%, and were driven to the downside during the rest of the week. Yields reached the lowest weekly level at 3.8%. Thursday and Friday brought back some short volatility, after the Retail Sales data were posted, however, yields are finishing the week at the level of 3.88%. During the week ahead the Jackson Hole Symposium will be held on Thursday and Friday. After the symposium, Fed Chair Powell will hold a speech, which might bring back some volatility to the market, considering current nervousness around rate cuts. Still, it is not expected that the yields will move significantly to either side, except to test, for one more time the 3.8% level.
Increases in unemployment + yield curve disinversions + SPYIncreases in unemployment + yield curve disinversions have led to lower equity markets
10 Yr Yield-100/200 monthly SMA cross is inevitabThe crossing of the 100 SMA ABOVE the 200 SMA on the monthly 10 year yield is inevitable...it will cross shortly no matter what rates do from here on out...even if they declined to 2% tomorrow.
What does this mean...IMO it means longer term lending rates will remain higher than people/corporations are used to seeing over the last 20 years. The prices we are seeing today will more than likely be what we will continue to see over the next 7-10 years; at the very least.
As you can see from the above chart, the 100 SMA crossed BELOW the 200 SMA on the monthly in 1990 and we all know what happened after that cross...we ended up being in a declining interest rate environment from 1984-2020.
We are now in either a longer term increasing interest rate environment or a stagnant one at best.
At this point we know the Fed is "thinking" about lowering short term rates but they are no where near a fierce rate cutting trajectory in the near term. Therefore, in order to project some relatively near term SMA's, I used the "SMA prediction" that @vladimir.kamba created to project out the likely path the SMA's may take in the near term. See link below (green lines) for the projected SMA's.
If the past in any indiction of the future...after the cross happened in 1990 rates were never able to touch the 200 SMA until 2018 (28 years later). The 200 SMA has flatted out and is projected to turn slightly up; which it has not done since the 1950's...Woah!!!
The point of this post...get your finances in order to anticipate this new rate environment! Those people or company's that refinanced at really low rates BUT used short term financing must anticipate refinancing those loans at much higher rates and/or should pay them off if possible. Do not count on rates going back to where they were over the last 20 years.
Could we be transitioning back to a period of time where "savers" are rewarded? Could that be why Warren Buffett has dramatically increased the cash pile at Berkshire Hathaway to around 25% of the total portfolio?
10YR Treasury 8-1410YR Treasury 8-14
If the 10 YR can close below that 3.801% level tomorrow the mortgage world will be back in business!!!
- Cody Inman
US10Y: 14 AUG, 2024US Bonds 10 YR Yield: 14 AUG, 2024 - 4H Chart
© Master of Elliott Wave Analysis: Hua (Shane) Cuong, CEWA-M.
10 YR Yields, the main trend is bearish. Currently wave (C)-orange is unfolding to push lower.
Wave ((iv))-navy has just completed at 4.022%, and wave ((v))-navy is unfolding to push lower, targeting the immediate target at 3.676%. While price must remain below 4.022% to maintain this view.
