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US Government Bonds 2 YR Yield

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US02Y trade ideas

Where we are now and how much more to goFolks, It has been a hectic week and I hope a profitable one for those who follow VP + Demand Supply instead of #$%^&**(())!@. Next Thursday is going to see some BIG moves when the 09/2022 CPI is release. Let us take a step back and have a look at the overall picture. Just look at the inflation number and appreciate how HIGH it is. The EFFR is not even halfway there. Looks like there will still be a lot of rate hikes to go before the EFFR meet up with the CPI, probably somewhere around 5.50%. Perhaps then, can inflation be beaten. In the meantime, DJI/SPX/NDX are still clinging on to the SUPPORT zone, hoping things would turn around. But I guess they would be disappointed. There is a BIG chance the US02Y would punch through 4.40 - 4.60% next week. That would be a confirmation that rates will move higher. Have a wonderful weekend. P/S : As always, do not just believe what I say. Use your common sense.
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by i_am_siew
What happened and what will happen NEXTFolks, It has been a busy time. It seems FEAR had taken hold and GREED had to take a back seat for the time being. Russia announcement of mobilization moments before FOMC seems to have caused great anxiety. I failed to anticipate the speed of the fall in EURUSD. As we all know now, the 'increase' in the 09/2022 dot plot is 'smaller' at 1.00%. Market is anticipating another 75bps in 11/2022 and a final 50bps in 12/2022. Probably another 25bps early in 2023. As you can see, we are actually there NOW, near 4.40%. Whatever it is, it seems the US02Y movement UP is taking a breather now. At least some sanity remains. We are now at the crossroad. Now all eyes is on whether it moves UP beyond 4.40%. It if does, we can expect EVERYTHING ELSE to continue FALLING - Stocks, Crypto, FX, Gold etc. The only thing to rise is $$$$$. There is a REAL risk of a GLOBAL RECESSION coming. Dollar would do well until the Fed Pivot. So we continue to look at US02Y to see if it dips below 50MA. Good Luck. P/S : As always, do not just believe what I say. Use your common sense.
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by i_am_siew
The yield curve has inverted, how to overcome this?Content: • Difference between interest rate and yield? • Why it is important to note of yield curve inversion? • How to tell when Yields are inverted? • What is the long-term trend for interest rates and yields • How to manage a rising yield? Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. 1. Difference between interest rate and yield? i. Interest rates are a benchmark for borrowers and ii. Yields are for lenders. For eg. investors to the U.S. government iii. Both interest rates and yields move in tandem together 3. Why is it important to note yield inversion? i. For eg. - when the return on a 30-years yield is lower than the 2-year yield, that indicates a ii. For lenders or investors – a pessimistic outlook, a reluctance to commit their money to the longer-term bond, they prefer short-term deposits as the market is unclear in the long-term. iii. For borrowers – most individuals or companies have shorter-term borrowing, for eg a 2 years fixed rate or a bridging loan. When the yields are inverted, suddenly they find them paying more on interest rates repayment. Since interest rates and yields move in tandem, expect the shorter-term lending rates to go higher. This will hurt companies and individuals who have higher leverage items on their books. If you are into shorter-term trading, do look into the market with live feed data. I am starting an inflation series, in the next video tutorial, we will discuss why inflation is happening not just in U.S. but all around the world. Micro 10 Years Yield Futures 0.001 = US$1 3.488 = 3488 x US$1 = US$3,488 3188 to 3488 = 300 x US$1 = US$300
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by konhow
2 Year Treasury Bond Yield vs FED Funds RateThis post is intended to show the current gap between the market for the 2 year US treasury yield on bonds and the official funds rate, and why the market is forcing central banks hands into raising interest rates when the market is in such a fragile state in ability to support and maintain debt at heighten interest rate levels. Simply put, bond market are crashing (i.e. no one wants to hold onto treasure bonds at present because they are yielding very little / people are losing faith in governments ability to uphold their debt obligations / competition in the market for credit is rising etc. etc). All these factors play into buying selling behavior and is repriced in the market. As a bond or lone has a fixed bond or repayment structure ($amount), if the capital price the bond changes hand in the secondary market is lowered, the effective yield from the bond goes up. For example if a bond is made for $10,000 and requires a 10% interest rate (i.e. $1,000) per specified period, then if this loan / contract / bond (same thinking) is changed hands in the secondary market and sold for $5,000, the new own still receivers the conditions of the prior arrangement. Hence $1000 per period. As the price was $5,000, then the interest or Yield on that bond is now 20% (i.e. $1000 / $5000 x100 = 20%). As new credit is competing against the secondary market (i.e. you could loan your money out to a new loan or you could buy an existing loan (Bond) on the secondary market), this is how the bond market drives interest rates. Complicated but hope this makes sense. in summary, falling bond prices cases rising yields or interest rates. Raising bond prices causes lower interest rates. Central Banks play in this market as a market participant with an unlimited check book (this is how new base currency or M1 enters the market ( QE - Quantitative Easing) or is removed from the currency supply (QT - Quantitative Tightening ). If Central Banks want interest rates to rise, they flood the market with bonds, dropping the market prices with excess supply and causing yields to rise. If they want interest rates to drop, they soak up supply in the market of bonds, causing prices to rice and yields (interest rates to drop). This process is called 'Open Market Manipulation'. AKA planned market manipulation at it's best. www.federalreserve.gov The 'official funds rate' is just a forecast which shows how the Central Bank plans to manipulate the bond market until it's next meeting. Interest rates on loans / bonds etc should be viewed as a measure of risk of default. High interest rates reflect the reward on offer for lending your currency out and the risk you will not get it back. In short, Market conditions (such as inflation ) changes investors view on risk. When Central Bank manipulation of the bond market goes our of whack with the risk to lending in the market, we see large gaps between the yield curves on bonds between the official funds rates issued by the Central Bank . This gap is clearly shown this chart, comparing the 2 year yield against the Official FED Funds rate (the interest rate you hear about on the TV). History shows the 2 year is a good leading indicator on what Central Banks will do with interest rates. Make no mistake, the market and inflation is forcing Central Banks to raise interest rates. I very much question the robustness of 'the economy' to handle higher interest rates at present.
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by Brodie
3
Next Stop 2007 House Bubble Limit?Well the MoM general downward trend of the 2yr yield and the Fed Funds rate is broken. We've surpassed previous rates and looking now to reach the rates of the 2007/8 housing bubble. Yield inversion becoming flat, due to rising 30yr rates vice the lowering of the 2yr, and with newly relaxed lending for first time buyers, it looks like rinse and repeat for a bubble. Hopefully we learned from the past and only buy within our budget. Glad I was able to get a fixed rate. My money is on another rate hike from the Fed. TVC:US02Y FRED:FEDFUNDS
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by H3-Publications