US 3-month bond yield - a recession signal?The US 3-month bond yield looks like it's rolling over. In recent history this has sometimes been a signal of an incoming recession.
Government bonds
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
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.
Bond yield curve shift changeBSE:754GS2036 Nothing technical about this trade but the very basics of profiting from fixed income security analysis
We know that the stock markets are at an all time high and valuations seem to be getting steeper day by day, we also know that we are going to be entering a rate cutting environment for the coming future initiated by the Federal reserve
So predicting that a similar suit will be followed by the RBI, Long term duration bonds would benefit from the convexity effect the most and interest rate cuts will shoot the bond prices further, also this investment contains very little to know risk because it is a government sector bond and at the current price an approximate YTM of 6.8 - 7% will be achieved
My forecast is that interest rate cuts will take place in India soon enough, on top of that, having a flight to safety security like the G-sec bonds will also be beneficial considering that we are at very high market levels. If you agree, do consider buying G-sec bonds not only for the annual 7% return but actually to capitalize on the forecast that there will be future interest rate cuts in India in the coming 1-1.5 yrs.
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.
1 year yields matterA break lower in 1 year yields will confirm that a recession has arrived. Stock market should follow lower until the FED drastically cuts rate, & then markets will recover. Same playbook for the last 100 years. This time ain't different
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.
US02Y / US10Y Yield CurveThe Yield Curve has been inverted for a long time, and as rates are about to go lower, it can finally un-invert. When the 2-year yield is higher than the 10-year yield, the chart is above 1.0 ; But once the 2-year yield dips below 10-year yield, the chart should drop below the 1.0 mark.
US Government Bonds 30YR Yeld (US30Y)As inflation trends closer to the Federal Reserve’s 2% target,
speculation grows around a potential interest rate cut.
The futures market anticipates a 50-basis-point reduction
at the conclusion of the Fed’s September meeting and for rates
to be a full percentage point lower than the current 5.25%-5.5%
range by the end of 2024.
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%.
us02Y(Mallicast)The U.S. two-year Treasury bonds, after reaching a yield of 5.093% and gathering liquidity, have begun to correct their previous upward trend. This correction is expected to continue until it reaches 3.555%, with the possibility of further correction down to 2.832%.
