I've decided to decrease the upside objectiveConsidering the high recession potential, I don't think US2YT can raise at a 4,75% level.
3,75% should be more realistic but still high for many
US02Y trade ideas
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Yes, FED will continue to raise rates its 4,75-5%So you think FED will stop to raise rates ?
No they won't.
Now they don't care about market.
They don't care about your wealth effect.
Their main idea : having again a job market fluid. Get back to work !
And destroy demand, inflation, russians and make the dollar win.
Its bull for short term rates that will go to 5%
Government Bond Yield Surge - US2Y, US5Y, US10YThe crypto & stonk killer. Rates have been exceptionally low because of crisis. Look back to 2009. They went up in 2016 for a little bit while donnie complained. (he wanted that easy money because he tweeted about stonks his entire time in office). They drifted lower thereafter and then BAM! Another crisis the government had to print through. Where did all the PPP money go??? Kodak? DWAC? Nobody knows. Frauds abundant and the Fed will now run-off their near $9T balance sheet and start lifting rates. Plebs keep buying $SPY & Tesla calls or Simpcoins. #clueless
Should be an epic show.
*valuations matter
Rates will bust the Fed's 2% Long Term average goal with ease. Crypto kids will go broke and they should blame their doge daddy for pumping them for personal gain.
The "trillion" dollar companies will implode. Shibby Bitty too. All of it.
GL
US02Y-US10Y 🎯Wells Fargo Chart of the Week 🎯💰🤔Hey Fam. 😊🙏Just wanted to share this information with you all.. I found it very interesting.. This was a chart of week that Wells Fargo shared on there site. I thought it was interesting how they saw a 4 week inversion roughly 43 weeks on average in regards to our last seven Recessions before they happened (Shaded Areas on chart) Before a US recession officially started.. which is roughly about 10 months..🎯💰🤔👌🙏😊
ICARUS , known to most as 2Y-10Y Yield ~ I am nicknaming the 2-10 year yield "Icarus".
Pushing back towards to the sun with haste it would seem .
Kind of interesting how this is off the media radar today .
Oh my wings! See my two wings! How I love to fly!
-The final words between: Icarus, and his father~
Yields are on the verge of breaking-out.In log mode, we can clearly see the trend of yields dating back to the late 1970s.
Consistently lower yields on both the 2 year and the 10 year government bonds.
Representative of both the long and short duration bonds and their yields.
What we can see happening here is a breakout of this downtrend.
We are already at between 2.5-3% on the 10YR and the 2YR yield.
The Federal Reserve's planned tightening schedule combined with the inflation panic will drive both of these metrics up into the 3% range and beyond.
The only way yields could reverse here is through seeing a risk-off move from equities into bonds which would drive up bond prices and in turn, drive down yields.
Similarly, higher-yields could tempt investors into bonds at a point in which many stocks have already entered a bear market and many are set to underperform. Market breadth is set to shrink dramatically as equity bulls focus their efforts into a narrower set of large-cap stocks.
The FED has an interest rates decision next week amd therefore this quarter will be crucial in determining the direction of the markets.
Weekend Research - S&P &US House Prices VS Bond Yield Inversion Just sharing this for anyone that is interested , just personal research and I decided to do this one in light mode so that It will print better .
Just helps to look at the relationship between prior times where 2 year bond yield has paid more than the 10 year versus the S&P 500 versus the house prices in the USA . I think it would also be interesting to compare additional metrics such as volume of house sales too .
Looks like we might have more stormy weather ahead , which is why it is important to know what your strategy and risk management requires of you under what circumstances . From these charts, it would seem that it may be wise to develop a plan to profit from more downside move in the market. I am personally long bias and at this point in my journey am fairly efficient at protecting the account during bearish market periods, but, I would like to get better at generating profit during those same times.
Inverted Yield CurveThe chart shows the Inverted Yield Curve vs S&P500 both on logarithmic scale. The Yield Curve start to invert when US start to raise up interest rate, and Yield Curve start to recover when short term rate is higher than longer term rate. It's not accurate to say that Yield Curve is indicator to recession or market crash. Because there still a 1~3 year periods of market rally after Yield Curve inverted before it went bust. So to be accurate the market start to dwindle down right after the Yield Curve back to normal, not after Yield Curve start to invert. So we still have a brief period to invest in stock until after rate reach high enough to be un-investable, then we should be worry about market crash.
In depth analysis of bond yields & the USD! Macro series pt2Part 2 This is the second part of the macro analysis series. In this part we'll focus on analyzing the current situation around the US bond market and the US dollar, while trying to map out the future depending on how the Fed and the economy move. You can find the rest of the analysis on the links down below.
After going in depth about interest rates, the USD, the Fed and the economy, it is time to accompany everything with some charts. In the first chart we have the 2year yields of US government bonds which have been in a downtrend for more than 30 years. Based on technical analysis there is resistance for yields at the 1.3-1.5% zone, as well as 2-2.5%. The fact that we are so close to the first resistance is matching well with the fact that after the first rate hike the Fed might not raise rates again, and rates might actually start falling again. Even if that’s not the case, if the Fed tries to push the narrative that it will raise rates even more, we could see the 2y bond yield go up to 2% and stop there, by respecting the long-term downtrend. That also goes well with the fact that inflation could be potentially coming down and even be below 2% by the end of 2022 or with the fact that at that point markets might start to collapse, forcing the Fed to lower rates again. In the second chart we have the 10year yields of US government bonds, and the downtrend in this one is much cleaner. This one is very close to major resistance already, yet it could climb up to 3-3.5% before it tops. Breaking above the resistance channel doesn’t mean the downtrend is broken until we get a close above 3.5%. It is key to note that both charts are showing major signs of long-term bottoms, which could last for years but until we see these trends break it is early to confirm a reversal. For example, the 10y reclaimed its 2012-2019 lows and is showing some strength, while the 2y has had a perfect round bottom and is currently going up strong. The truth is that their bottoms in March 2020 really look like a proper capitulation bottom, ones that could signal the end of a major downtrend.
By looking at the actual price of long-term bonds ($TLT, $UB etc), we can see that they had a proper blow off top. Before we get into our views on bonds though, something we need to clarify for those that don’t know much about bonds, is that bond yields are inversely correlated with the price of bonds, which means that when yields go up, bonds go down and when yields go down, bonds go up. Therefore, the blow off top in bonds could be a major signal that bonds have bottomed for good (yields could be headed higher). To an extend the current drop in bonds could be attributed to the fact that the same way the pendulum swung too much on one side and it is now swinging on the other. This is a pretty reasonable assumption as the bond bull market has been raging for years and in Feb-Mar 2020 it got extremely overbought. Hence shaking out traders who believed and still believe that yields would turn negative soon might have to suffer for a few more months or years before they see their ideas play out, if they ever do. Having said all that is we need to remember that the blow off top was accompanied by some fairly strong actions by the US government and the Fed, in order to save the bond market and the economy, both of which were under immense stress and almost collapsed. Nearly 2 years later and all the support is being withdrawn as the government has cut down its spending, the Fed will raise rates and shrink its balance sheet, and the pandemic seems to be over as Covid has become endemic. These are having notable effects on markets as the 2y yield has been rising faster relative to the 10y and they are now only 60 basis points apart, while in March they were 160 basis points apart. That means that the yield curve has been inverting, which is a major signal that future growth expectations are muted, yet another sign that the Fed might now be able to raise rates much. Essentially the bond market is telling us that there could be some short-term inflationary pressure and growth, but in the long run we won’t have much growth or inflation. Finally, the last key observation is around the Fed doing Quantitative Tightening (QT = shrinking of the balance sheet), which empirically tends to depress long term yields. Usually when the Fed buys bonds, yields go up (when in theory they should go down) and when the Fed sells bonds, yields go down (when in theory they should go up). The reason behind this is that when the Fed buys it creates a risk on environment, so the banks that sold them their bonds go buy other riskier stuff, and when the Fed sells it creates a risk off environment, so the banks that buy the bonds want more bonds. To sum it all up again and put it in a tradeable idea, we could see yields trade higher and higher, and actually peak in March around the time the Fed plans to stop purchasing bonds, a clear buy the rumor sell the news idea.
Next chart is the USD Index, or else known as the DXY. I’d like to start by saying that although this isn’t the best way to measure the performance of the USD relative to other currencies, it is the most commonly used one. Just a few days ago the DXY had a major breakout with a lot of strength and it could go higher, despite the fact that we didn’t get immediate continuation. Since 2015 the DXY has essentially been going sideways, and has formed a pattern that looks pretty similar to 2008-2015 period, something someone could call accumulation or in this case re-accumulation. In our opinion the probabilities of the DXY getting to 112-120 first are slightly higher than getting to 80-84, as the short term and long-term trends are bullish, while the medium-term trend is neutral. Of course, it wouldn’t be surprising if it gets to 80-84 to bottom and then go to 112-120 if things get very volatile with Central banks and especially the Fed taking a lot of actions. In case it goes above 105, then the Fed, the US government and other Central banks will seriously have to think of a way to devalue the USD or there is a risk the global economy will face extreme problems. Despite the fact that these problems could be somewhat preventable, taking any sort of action now will probably have a huge political cost. Everyone wants a weaker dollar as most people owe dollars, not own them. The world is short on dollars, banks in and out of the US aren’t really creating many new dollars, the Fed isn’t creating dollars and yet more and more people rely on the dollar as a store of value or as a medium of exchange. Eventually the world needs to get off the ‘dollar standard’, though this is more likely to happen when push comes to shove. Governments and Central banks will eventually find a way to devalue to the dollar and transition to a new system, but they aren’t ready yet and this is more likely to happen after we get another major financial crisis.
The FED cannot hike ratesIf they try that brings us above trend, they will need to revamp QE to save this market from a recession or possible collapse. The bonds have run lately, my thesis is they will go ahead and say the market has hiked rates for them and meanwhile keep the QE pump going to subdue the bond yields from spiking any higher. If this starts to happen it could freeze the credit markets, we need to keep the cheap money flowing because we are now addicted to it, Yellen tried in 2018 and failed had to drop them back to zero.
Yellen Failed rate hike
www.cnbc.com
You can argue whether this graph really shows anything maybe its a coincidence? But the 2yr has shown its an important indicator and is controlled by the FED. A Keynesian economist should argue we hike rates during a market boom and cut during a market decline, however in our case all we do is cut with failed attempts in rate hikes. We have moved to an age of MMT and during FED testimonials make Japan the model or refer to them as being in worse debt than we are. Credit markets are fragile and as bond yields spike higher we are seeing adverse affects on the economy.
Whether you agree with me or not I think the test is what the FED announces in March and how the markets react, if they do rate hike from where we are then they created a noose as we should break trend. BUT IF they say the market has already hiked them for us then WE KNOW they likely see the same trend.
Just my thoughts I am an idiot on the internet but wanted to share this in case I am correct. Good luck in your trades!
