Economies everywhere seemingly forsee rate hikes occurring soon and short term yielded treasuries are shooting up at rapid speeds to its pre covid levels. For perspective, longer term bonds like the US10Y have been at its pre covid levels while shorter duration notes and bills are moving up to this level quickly; flattening the curve. The lower duration yields have been plastered to zero, until now, with the fed making cuts to its auction participation there will more than $400 million bond purchases less in lower duration bills and notes purchased. This lowers the demand and increases the yield. The yields of lower duration bonds don't show much resistance to reach their pre-covid levels. I believe we are going to see yield curves invert in the next 3-5 months because shorter term bond yields are showng relative strength compared to longer duration ones.
The chart shows US10Y is at its pre covid levels already. They don't have any more economic growth to price in. The higher duration yields are stuck in a consolidation zone. Those bonds have already been priced at pre-covid levels because they are longer dated. Notice how the US30Y is not moving as much as the other bonds. There is a high demand for 30 year especially from indirect buyers. Gold's movement leads yield and Gold seems to be going down more. It is forming a consolidation pattern we will see which way it breaks.
The US05Y shows that shorter duration yields have room to rise compared to the longer term yields. People everywhere are feeling higher prices and attributing this to"inflation" - or shortages, supply chain woes, covid complications. Whatever it is yields on the short end are rising quick. Central banks are receiving a lot of heat everywhere especially Lagarde and Powell. They would like for rates to be higher because at least that gives them some ammo in a downturn. The weakness in long term yields show there is less of a problem with an overheating economy persisting long term. Pointing more to the understanding that the movement in rates is saying long term we aren't going to get the same price increases as right now.
The bottom charts show the yield curves of : US10Y-US02Y, US30Y-20Y (already negative / inverted) and US10Y-US05Y. All These yield curves signal impending flattening which will kill growth in the long term. If you look at the central banks which have already cut back/canceled bond buying they are all economies tied the commodity trade like Canada and Australia. They are going to be feeling these effects much more. Powell will gladly announce tapering of emergency bonds sooner or later. The US05Y auction was very strong with a very high yield compared to what was bidded. There was also a lot of demand from indirect bidders so foreign entities. Shorter yield bonds
The treasury is set to reduce government funding in a move to reduce the central bank's debt supply. There will be a difference of 700 million purchased between 2022 and 2021. With the government not buying as many bonds in the future and longer term rates going down shows me there is not going to be runaway inflation.
*In my opinion the energy play is over for now. All my play Uranium(CCJ), Natural Gas(UNG/TELL), and Oil (OIH) have all hit targets and resistance and are cooling off. Not to say the underlying commodity won't rise in price but, operating margins will negatively affect corporations working with commodities so, best to collect profits in energy and rotate into other sectors like healthcare, utility and value. Growth stocks are going to suffer going forward.
US05Y Auction: www.treasurydirect.g...021/R_20211027_3.pdf
US10Y Auction: https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20211012_3.pdf
The chart shows US10Y is at its pre covid levels already. They don't have any more economic growth to price in. The higher duration yields are stuck in a consolidation zone. Those bonds have already been priced at pre-covid levels because they are longer dated. Notice how the US30Y is not moving as much as the other bonds. There is a high demand for 30 year especially from indirect buyers. Gold's movement leads yield and Gold seems to be going down more. It is forming a consolidation pattern we will see which way it breaks.
The US05Y shows that shorter duration yields have room to rise compared to the longer term yields. People everywhere are feeling higher prices and attributing this to"inflation" - or shortages, supply chain woes, covid complications. Whatever it is yields on the short end are rising quick. Central banks are receiving a lot of heat everywhere especially Lagarde and Powell. They would like for rates to be higher because at least that gives them some ammo in a downturn. The weakness in long term yields show there is less of a problem with an overheating economy persisting long term. Pointing more to the understanding that the movement in rates is saying long term we aren't going to get the same price increases as right now.
The bottom charts show the yield curves of : US10Y-US02Y, US30Y-20Y (already negative / inverted) and US10Y-US05Y. All These yield curves signal impending flattening which will kill growth in the long term. If you look at the central banks which have already cut back/canceled bond buying they are all economies tied the commodity trade like Canada and Australia. They are going to be feeling these effects much more. Powell will gladly announce tapering of emergency bonds sooner or later. The US05Y auction was very strong with a very high yield compared to what was bidded. There was also a lot of demand from indirect bidders so foreign entities. Shorter yield bonds
The treasury is set to reduce government funding in a move to reduce the central bank's debt supply. There will be a difference of 700 million purchased between 2022 and 2021. With the government not buying as many bonds in the future and longer term rates going down shows me there is not going to be runaway inflation.
*In my opinion the energy play is over for now. All my play Uranium(CCJ), Natural Gas(UNG/TELL), and Oil (OIH) have all hit targets and resistance and are cooling off. Not to say the underlying commodity won't rise in price but, operating margins will negatively affect corporations working with commodities so, best to collect profits in energy and rotate into other sectors like healthcare, utility and value. Growth stocks are going to suffer going forward.
US05Y Auction: www.treasurydirect.g...021/R_20211027_3.pdf
US10Y Auction: https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20211012_3.pdf
Comment:
Summary of post in simple english: Short termed treasury yields will move faster than long term.
Comment:
Gold usually front the movement in long dated yields. hence why I included that chart.
Comment:
Notice how far away shorter duration yields are from its precovid levels than longer duration ones.