2 year yield plummetsThe 2 year yield has dropped below the Fed Funds rate. This appears to be the bond market pricing in an imminent Fed pivot.
US02Y trade ideas
DXY is now Risk On scenario now as banking sector gets crushed!Sharks are smelling blood in the banking sector and they are loading up to strike. Last week, we saw Silvergate Bank collapse and shortly after that, Silicon Valley bank (SVB).
Within 48 hours, 2 moderate size regional banks went under. Last Friday, several banks tanked at least 20% and few were halted due to massive shorting.
The house of cards are falling and this situation looks like a Lehman Brother's. Contagion will spread to vulnerable sectors such as housing and auto.
Jerome Powell wants to further increase interest rates, which will cause more destruction. Investors will be spooked and wanting to pull their money out of Dollar debt system and investments.
2 year US Treasury Bond yields dropped off the sky. With US national debt being so incredibly high at $32 Trillion and counting, US Treasuries are also no longer safe havens. Gold and Crypto perhaps?
DXY just broke new lows on Daily timeframe. The bear market rally is over I believe and with the catalyst of collapsing banking sector with its contagion expectations into other sectors, DXY is Risk On now, which is Bearish.
By Sifu Steve @ XeroAcademy
Looking for a wick off 4.14 then accumulating within the redExpecting a wick off the black line then accumulating within the redlines before moving up: CPI and fomc should see this play out.
Why are bonds falling today?I noticed a large waterfall sell off of both 2year and 10year. What was reason behind such a volatile move?
Japanese have been selling bonds, have Yields peaked for now?One of the reasons US Treasuries, and other bonds, have been selling off is the dumping by Japanese investors.
All duration #YIELDS have done well but more so the shorter term. The Inverted Yield Curve has widened over the last few months but has been significantly lately.
However, today we see the 1 & 10Yr ($TNX) selling off but the 2 Yr is CRATERING! Interesting.
Also interesting is that volume has been waning for investment grade and high yield bonds. Liquidity could be an issue later on if this continues.
US02Y - US01YThis shows you that the market still has a rate cut priced in for next year. I'll be a lot more bullish on the market if they price this out.
Inflation is here to stay, and so are high interest rates. The market can still go up though, but as I said earlier, bonds should not be going up.
Possible bullish impulse move on the 2 Yr.Bull flag + bullish continuation on the momentum osculators + stocks falling + dollar finding bottom
🔥 US Bond Yields Suggest More Interest Rate Hikes: BEARISH 🚨The US 2-Year bond yields are important because they tell us how much returns an investor will get by lending his money to the government. In periods of higher economic risk, investors demand higher returns. Thus, the height of the bond yields can be used to determine whether we're in an economically risky period or not.
As seen on the chart, once the 2-year yield starts increasing, the FED will increase the interest rates. Higher interest rates are BEARISH for the markets.
With the 2-year yields making a new high recently, it suggests that the FED will need to increase the interest rates further. Is the current 25 basis points enough to tame inflation and market risk? Certainly not if the yields will keep like this.
If the yield will keep on rising there's a decent probability that stocks will continue to go down. If so, crypto will likely follow.
For now there's little reason to believe that we're going to make new bear-market lows, but once stocks will really start selling off this probability will increase. Will monitor.
US 02Y possible black swan for stocksUS 02Y is close to breakout from the bull flag. After reaching the top, the price of 2 y did consolidate but never dropped hard. After consolidation on this level, it seems it's ready to break out of the bull flag which would be very bullish for 2 Y but bearish for the market as a whole. Remember, even though a lot of retail traders follow FERD, they should follow 2 Y yield as that is what FED and Powel followed. FED is much smaller than the bond market, and the interest rate on the 2-year bond is something that is important for FED.
Also one of the main problems for retail traders is most of them don't follow yield inversion which is now at a huge level. Meaning the interest rate is now higher for a 1 or 2-year bond than on 10 or 30 which is insane and is a sign of huge money indicating something big will break out soon. Every yield inversion till now finished with massive stock collapsing, so will likely now too.
With the breakout of the bull flag, there would be a trigger possibility for 2 y to retest highs which would mean the FED fund rate must go much more than 5% which would be very bullish for US Dollar/DXY and very bearish for stock, crypto, and gold and silver/ commodities as a whole.
A good thing would be that all would have pressure on inflation which we all need at this moment.
Daily Bearish Cypher looking for 3.62% over the next 3-6 monthslooking at the daily chart, I see weakness on the 2yr treasury yield. There is a bearish cypher pattern on the daily chart. A great short opportunity would be near 5%..If it gaps above previous C-wave sell off that would be a buy up tot he short level near 5%...It can also short at this level. But overall based on my TA I see weakness. You also see similar in the 20yr treasury etf tlt
Bond Yield Update2Y bond yields still melting up
This leads me to believe that tomorrow is gonna be a pump and dump, nobody expecting a rate cut soon, and market still needs to price in a rate hike for July.
The algos still have to make their money, so I expect a gap up then a sell off as bond traders price in a rate hike. Remember the inflation target is 2%, the expected numbers are:
Expected CPI Tuesday 5:30am
USD CPI m/m 0.5%
USD CPI y/y 6.2%
USD Core CPI m/m 0.4%
I think the numbers come in as expected, the market pumps it because it's better Y/Y but then sell off because of M/M numbers like Europe did last week.
Are the FED hike rates really peaked?Whenever we sow down crossing between FED fund rates and US 2Y yield bull market started (BTC, SPX ...). Now that crossing seem to happen even now but in the past it never happened if inflation was above them.
Can we expect inflation to start rapidly falling in next weeks and months to go below fund rates and yield?
Bond Yields 1 vs 2 yrThere's still an inversion between 1 and 2 yr bonds, which means the market still has a rate cut priced in for next year. On top of that, it looks to me like we're headed over 5% this year, so even the 1 yr needs to go up.
What's interesting is that the rate inversion started at the same time as the market rally, last Oct.
I dunno if the market fixes some of that Tuesday or just gets all pumptarded because inflation only went up .5% m/m like Germany did, lol. .5% m/m extrapolates to 6% yearly, and it took then a few hours to figure it out, lol. Remember the target inflation is 2%, and it;s gonna require more than one more rate hike to drop it down.
Pretty good chance Tuesday winds up being a pump and dump like Europe, but I'm gonna carry a small position in TLT and BITO puts. Decide against doing a straddle.
2 year yield patternThe 2 year treasury yield is a very good predictor of the Fed Funds rate. Since April 2022 the yield has formed a broadening ascending wedge pattern which indicates a potential move down. For the last couple of months the yield has been in a narrow downwind channel. With CPI data coming soon this could trigger a breakout either to the upside or downside which is likely to trigger movement in stocks. A drop in this yield would be bullish for stocks and vice versa.
FFR Inversion with 2 Year USTMany believe the Fed kept the Federal Funds Rate (FFR, in orange) too low for too long. But the recent path of hiking has caused the FFR to now get above the 2 year UST yield (in blue) -- a situation that rarely happens, and rarely is a "good" sign for markets. Stay alert.
2 year yield breakoutUpside breakout from a triangle pattern on the 2 year yield. This is something that if it continues could put a dampener on the stock market rally. That and also the bounce in the DXY.
Are yields about to spike again?Yields saw a massive turn to the upside after the latest job report number coming in red hot.
Showing the US labor force is a juggernaut.
If we see this Bullish consolidation break to the upside this implies interest rates are going much higher.
If this pattern comes to fruition and fulfills it upside targets, this would also imply the likely catalyst that could spike yields even more could be a hot CPI number or additional Labor data.
Bear market over..... Check historyLook at the history, the market has shown indications in the past when it bottoms. look at this chart. we are at the pivot point.
every influencer is bearish....what happens when everyone is bearish?? The market goes bullish.
Get ready.
S&P500 may be on the verge of a mega rally based on the US02YThe chart represents the US02Y on the 1W time-frame against the S&P500 index (green trend-line). The phase that the US02Y has entered is similar to that in entered in December 1994. As you see shortly after a Golden Cross, it made a Lower High on the RSI, flashing a Bearish Divergence, while the MACD Double Topped. This is exactly the same sequence of events in the exact same order since the June 2022 Golden Cross.
The US02Y fall of December 1994 practically started S&P's mega rally of mid-late 90s that led to the 2000 Dotcom Bubble. If history is repeated, instead of a continuation of the Bear Market that most expect, S&P500 my be on the verge of a new multi-year Bull Cycle.
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US02Y : Market speaks out!It seems that the front end of the curve is starting to 'speak out'. Unlike in the past, it is NOT moving up despite the recent 50% rate hike. This is significant because whenever the FRONT starts acting up, we can expect something BIG and SIGNIFICANT coming up.
As we can see, a BIG portion of market participants disagree with the recent Fed decision. In fact they are now betting against the Fed. This is a lot of money involved here. We are not talking day traders like you and me; or even big speculators. The Bond Market involves much bigger players and their opinion matters.
There may be two reasons. One is that they see the recent 'slow down' in rate hike might soon turn into a freeze and pivot, with a 'soft landing'. The second is more important. They might sense that the economy is nearing a RECESSION when everything grinds to a halt. Some are forecasting a deep and long lasting recession. For this, we look at the US10Y and see how much it will drop. But whatever it is, 2023 will not be a good year.
Three days ago, I heard someone talking that GOLD will reach $3,000 in 2023! And so says Saxo Bank. Perhaps you should be aware what will happen just by looking at Bond yield which is saying 'future growth looks 'bleak'. Gold, Oil and stocks will be at RISK with the coming recession. Whether it is a BIG one is still debatable. But if the Fed insist on hiking again, chances are it is going to be a BIG one. Money supply, at least in the US, is FALLING. If you look at M2 and do a simple extrapolation, to get gold at $3,000, there needs to be a really HUGE increase in MONEY SUPPLY (note that inflation do not determine Gold price. It has always been money supply. Whether money supply leads to inflation is another thing. But if market participants think that inflation is going to high in the future, would they continue to drive yield lower?) .
USDJPY would be a nice to trade. It is just a matter of looking for the right time/place.
EURUSD is a bit risky with the ongoing war in Ukraine.
Have a nice weekend.
P/S : As always, do not just believe what I say. Use your common sense.
Martin Luther King Jr. Day - Market AnalysisKey events:
US – Martin Luther King, Jr. Day
UK – BoE Gov Bailey Speaks
The recently released CPI is prompting investors to question the Fed's plans to raise the overnight rate above 5%. The market doesn't seem to care, and after this data coincides with the forecast, yields are falling across the curve. Thus, 2-year Treasury yields have fallen to their lowest level since October, with room to fall substantially.
If the Fed really does intend to raise rates that much and maintain tight financial conditions, then it appears that the market is not listening to the central bank and not paying attention to what it wants.
This only suggests that the Fed's forward guidance is no longer working. The Fed will have to dig into its toolbox to convince the market that it is serious. The central bank may have to talk about accelerating the pace of balance sheet reduction or outright sales of treasuries and mortgage-backed securities.
The market indicates that the Fed's interest rate hike cycle is coming to an end, with the belief that the central bank will be forced to cut rates as soon as 2023. However, the Fed continues to insist that it plans to raise rates above 5% and leave them high and financial conditions tight for a long time.
The 2-year Treasury yields fell to their lowest level since early October. This is the first weakening in months. Apparently, the rate cut is now embedded in the quotes of not only the federal funds rate futures market.
As a consequence, the Fed will be forced to use balance sheet talk as a last resort to ensure that rates remain elevated and the dollar remains strong enough to prevent a stronger-than-acceptable Fed easing of financial conditions.
The market, on the other hand, is trying to figure out how much pressure it can put on the Fed to maintain tight financial conditions. If the central bank is serious, sooner or later it will try to fight back. Otherwise, the Fed will lose control of the public discourse and won't be able to tell the markets what direction it thinks they should go.
Talk of a higher overnight rate is no longer having the desired effect, so the next option for the Fed is balance.
If it doesn't use that option, the markets will take it as a signal that the Fed is okay with easing financial conditions and thus gives the markets permission to continue the rally.
