US 10Y Yields - 2nd Bullish Leg Up To Equalibrium?Based on the last post on Yields, I was projecting a draw towards equilibrium; 4.169% with the possibility for a short term retracement down to the NWOG highly likely.
I would like to see the neighbouring FVG respected with the last line of defence @ 4.026% held throughout next week
US10Y trade ideas
US 10Y TREASURY: retail sales eased the sentimentThe US Treasury market was under influence of the posted data for the Retail Sales in the US in September, as a potential add-on to the total inflation in the country. Released data were in line with the market consensus, as the indicator was higher by 0,4% in September, leading to yearly increase of 1,7%. Without other posted data which would add to the potential move of the inflation in the US, the 10Y US yields eased a bit, and tested the 4,0% level. Still, at Friday trading session, yields ended the week a bit higher, at the level of 4,075%.
In the week ahead there are no macro data scheduled for a release, which could point to potential inflation movements, in which sense, it could be expected a relatively calmer week when US yields are in question. There is some probability that yields could test the 4,0% level for one more time, while odds are quite low for the move toward the upside.
Bond Divergences: ECB Under Pressure from FedThe European Central Bank (ECB) is under pressure to cut interest rates for the third time this year, prompted by the surprise 50 basis point cut announced by the U.S. Federal Reserve (Fed) in September. Although the ECB had planned to wait until December to make another cut, recent economic data, such as weak PMIs and falling inflation in the Eurozone, have forced its hand, making an October cut inevitable. As the Fed slows its cutting cycle, the ECB seems trapped with no choice but to press ahead, despite the risks of further euro depreciation and rising inflationary pressures. The divergence between the monetary policies of the two central banks also reflects a widening gap in bond markets.
In this context, the gap between US and German bonds continues to widen. US 10-year bond yields have risen sharply, while in Germany the increase has been minimal, reaching a gap of 183 basis points, the widest since July. According to Goldman Sachs, this gap could reach 200 points in the coming months, driven by solid growth in the US economy, while the eurozone continues to struggle with weakness in Germany and France. This has led more investors to opt for U.S. bonds, exacerbating pressure on the ECB to lower rates.
Elsewhere, in Asia, bond inflows declined in September, with a net total of $4.99 billion, well down from $14.09 billion in the previous month. This slowdown reflects investor caution about possible Fed rate cuts and uncertainties related to the US elections. However, the inclusion of Asian bonds in global indices could revitalize inflows in the future as investors seek new opportunities in the region.
Looking at the performance of US, German and Eurozone 10-year bonds, we can note that the first two have followed relatively similar candlestick trajectories, while the Eurozone bond has experienced greater fluctuations and volatility. This has generated significant disparities, including relevant price gaps in mid-July. If we compare the US bond, which currently trades at 4.038%, with the German bond, which stands at 2.208%, we see that, although Germany is trying to keep pace with the US, Europe is not helping to boost German bond yields. In fact, the Eurozone bond appears to be moving steadily in the opposite direction to the other two. It will be interesting to see whether the German bond continues to replicate the performance of the U.S. bond or whether it starts to correlate with the U.S. bond.
In summary, central banks in Europe and the US are on divergent paths, which is reflected in the bond market, with the ECB facing difficult decisions and global investors readjusting their strategies depending on monetary policy and geopolitical uncertainties.
Ion Jauregui - ActivTrades Analyst
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INCOMING LOWER HIGHS!!When they bring the talking heads on TV and make them say: "we haven't seen anything yet, yields are going higher!", you know it's time to buy them!
Every single time they do this, bonds yields are either making higher highs or very close to those "local tops".
It was identical prior to October 7th of last year. Look it up as a reference.
If you don't like that relation, how about you look up Ray Dalio 'warning us, poor naive investors' to NOT BUY LONG TERM NOTES.
Yields going up is nothing but a big lie in my moronic opinion.
This is the next 'Lower high' and I think we're now heading with clean air down to 3.26% on the 10yr note.
Why the US 10-Year Yield Deserves Close AttentionThe 10-year US Treasury yield, at its highest since July, has mostly moved sideways this year. However, the weekly chart reveals a potential falling wedge pattern. If yields close above 4.53%, it could signal a push towards new highs. Initial resistance is at 4.18% (200-day moving average) and 4.24% (55-week moving average). Markets expect a 25-basis point Fed rate cut in November, but investors are watching key economic data, and Fed comments for further insights.
Keep this on your radar, because while the market holds above 3.50, this longer term potentially bullish pattern will remain valid.
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US 10Y TREASURY: driven by inflationThe inflation data were the ones that the market was watching closely during the previous week. The September inflation came just a bit higher from the market estimate. While core inflation remained elevated at 0,3% for the month and 3,3% for the year, the inflation figures were standing at 0,2% in September and 2,4% for the year. As inflation is holding modestly above Feds target of 2,0%, the markets are anticipating the next Feds move. Whether they will cut in November or maybe, the next cut will be postponed for December. This question came after the Atlanta Fed President Bostic noted in an interview that the higher inflation data might impact his opinion to skip a rate cut in November.
The US Treasury yields reacted accordingly during the previous week, where 10Y US yields were pushed to the levels above the key 4,0% level. The highest weekly yields reached were at 4,1%, however, they slipped modestly toward the 4,073% at Friday's trading session. As the market is digesting the latest inflation, it should be expected for yields to calm down a bit in the week ahead. The next target of markets might be to test levels below the 4,0%, where 3,9% or even 3,8% might be the next targets.
$TNX The little Yield that could. You think the Great Yield slaughter of the 40 years was something; just feast your eyes on the great Yield breakout, eons in the making.
In our next predicted cycle of disastrous economic, but not all that surprising or unexpected economic events; we will now see the Great Bond Slaughter coupled with treasury yields sky high. An event the likes of which the world has never seen.
As you can see the TVC:TNX is flagging on all high time frame charts and has several upper targets to reach before then top is in.
Our next target being a measured move at 8%.
Since we called this breakout 2 years ago, it has not failed to disappoint.
You might also want to check out the TVC:VIX and TVC:DXY monthly/quarterly/yearly charts.
When the shit goes down, you better get ready.
~Cypress Hill
US 10Y Yields - Low Resistance Liquidity Run4 consecutive days of bullish price action with the potential to draw further up inside of the Feb 24 new week opening gap.
Short-term retracement is expected during conditions similar to now and would like to gee the NWOG for this week (still in a premium) filled with the last point of no return being a daily candle body closure below 3.946%
10Y bonds seeking support from April-July channelFrom April to July the 10 year Treasury yield was in a downward channel. It broke below that, retested the resistance-now-support for bonds, and kept moving until it recently re-entered.
The fundamentals for long bonds still seem strong, with the cutting cycle starting with an abrupt 50bp cut, but bonds seem to be seeking support. If yields break above this channel, then we may be seeing something unexpected sniffed out by the bond market. If we retest and continue the downtrend in yields, then expect a nice downtrend back to the post-2008 norm.
10Y is back in the April-July channel, testing supportFrom April to July the 10 year Treasury yield was in a downward channel. It broke below that, retested the resistance-now-support for bonds, and kept moving until it recently re-entered.
The fundamentals for long bonds still seem strong, with the cutting cycle starting with an abrupt 50bp cut, but bonds seem to be seeking support. If yields break above this channel, then we may be seeing something unexpected sniffed out by the bond market. If we retest and continue the downtrend in yields, then expect a nice downtrend back to the post-2008 norm.
US 10Y TREASURY: surprised by jobs dataThe major macro news during the previous week were posted nonfarm and unemployment figures in the US for September. The nonfarm payrolls significantly beated market expectation, by reaching the figure of 254K, while unemployment rate dropped to the level of 4,1% from 4,2% during August. The markets are now convinced that the Fed will slow down rate cuts till the end of this year to 25 bps, considering the high resilience of the US economy. Previously, markets were pricing another 50bps cuts. The US yields adjusted accordingly to new expectations. The 10Y US benchmark was moving around 3,80 during the week, but Friday's jobs data pushed the yields to the higher grounds, ending the week at level of 3,96. Yields were testing the level of 4% previously.
It could be expected that the markets will spend a week ahead by digesting the jobs data, in which sense, the 4,0% level could be tested during the week. At this moment, there is no indication that yields could move to the higher grounds. On the opposite side, there could be some relaxation, at least to the level of 3,9%.
10Y - 02Y outlookMy recent assessments have been negated.
I am mostly skewed to the idea it will break negative again, correlating to sentiment fuel for the blow off top in the SPX (no recession sentiment short term?).
Once it flips negative again, to back test the purple bull penant, I strongly expect that to correlate to the markets topping and will potentially exit if I see further confirmation across other instruments.
Reason for exiting prior to it flipping positive again if it goes negative, is because my research has shown me when the 10-2 yield spread is truly trending upwards to break 0%, the market falls with it, as I imagine "smart money" will know what's coming and exit.
Not financial advice.
Just my prediction for now.
DRUCKENMILLER TIPS: Shorting Bonds and MoreInvestment Strategy
Stanley Druckenmiller, a renowned investor, shared his market insights at Grant's Annual Fall Conference. He revealed that he is shorting U.S. government bonds, representing 15% to 20% of his portfolio. While he is unsure when these bets will materialize, his strategy is based on the perception that inflation could return to levels similar to those of the 1970s.
Disinterest in China
Druckenmiller also expressed disinterest in investments in China under Xi Jinping's leadership. This view contrasts with the recent trend of many investors betting on the Chinese market following the People's Bank of China's economic stimulus. Rather than following this trend, Druckenmiller is skeptical about the sustainability of the rally in the Chinese market.
Opportunities in Japan and Argentina
Despite his caution towards China, Druckenmiller was optimistic about Japan and Argentina. He believes Japan could offer attractive opportunities for investors, given that the Japanese economy has shown signs of recovery. As for Argentina, he praised the new president, Javier Milei, describing him as a “brilliant leader,” which has sparked investor interest due to his liberalizing economic policies.
Focus on Natera
Currently, Druckenmiller has focused its attention on Natera, a genetic testing company that has experienced a remarkable increase in value, highlighting a 191% growth in the last year. This choice reflects its strategy of seeking companies with high growth potential in innovative sectors.
Fiscal and Political Perspective
Druckenmiller, famous for shorting sterling during “Black Wednesday” in 1992, maintains a cautious approach to fiscal policy in the U.S. He declines to vote for the major political candidates, Kamala Harris or Donald Trump, noting bipartisan fiscal recklessness as a key concern.
Conclusion
In summary, Druckenmiller's investment strategy is characterized by a skeptical approach to the U.S. bond market and Chinese equities. In turn, it shows interest in economies such as Japan and Argentina. As the global economic outlook becomes more uncertain, his ability to anticipate market movements and adjust his portfolio accordingly remains critical to his success as an investor.
Ion Jauregui – ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
US 10Y TREASURY: pricing the PCE easingThe inflation measured through the Personal Consumption Expenditure Index showed signs of further decrease in August. The Index was standing at the level of 2,2% on a yearly basis, which was a bit lower from market expectations. The US Treasury yields eased after the release of data, bringing the 10Y US benchmark to the level of 3,75% as of the end of the week. During the first half of the week, the 10Y yields were exploring higher grounds, reaching the highest weekly level at 3,82%. At the same time, released final GDP Growth data for Q2 showed no changes on a quarterly level of 3% growth, which pointed to investors that the US economy was growing in a moderate pace in the environment of high interest rates, and that further drop in interest rates will be supportive for the boost of the economy in the coming period.
Current charts are pointing to a probability for further easing of the US yields in a week ahead. The non-farm payrolls are set for a release, which might bring back some modest volatility on the markets. Still, some significant moves in yields should not be expected. The levels around 3,7% might be tested in the week ahead.