Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

U.S. Bond Yield Carry Traders Need To Fade Upcoming Econ Events

Interest-Rates / US Bonds Jul 19, 2014 - 01:36 PM GMT

By: EconMatters


Fading Strong Employment Reports

The trend in the bond markets the last several months, and basically all of 2014 has been to buy bonds in the dead periods of econ reports, or the econ reports that would be detrimental to their non-growth, more dovish Fed case. And the last several weeks have been similar to the prior months, basically wait for the stellar job`s report blows yields up to 2.70% on the 10-Year and then buy bonds, pushing down yields in the three weeks after the Employment Report, with the goal of getting out before the next Employment Report.

Most Important Week in Trading

In two weeks though there is more than just the employment report for bond holders to fade in their overzealous addiction to yield carry trades as we finally get the first look at second quarter GDP, and no bond trader in their right mind is going to want to be long bonds in front of this report, with government data who knows what the actual number ends up being.

Literally regardless of what the actual GDP number ends up being due to revisions, the headline first look at 2nd QTR GDP could overstate or understate the actual GDP growth rate by 1, 2, or even 3% as we saw with the first quarter GDP. Remember first QTR GDP originally came in at a positive .01%, and ended up after revisions down a negative 2.9%.

Read More >>> This is a Trader`s Market

So literally the second quarter GDP could be growing at 3% and the number come in at 6%, government data is just that ‘noisy’ to quote the Fed Chairperson. At any rate expect bond yields to move up ahead of this event as yield traders get out of this trade on event risk, and depending upon the number in concert with the other econ reports of this important week evaluate whether to get back in on this trade.

CPI, GDP, Bond Auctions, FOMC Meeting & Employment Reports

As I mentioned the last week in July is an important week, but it isn`t the only econ report yield traders need to fade as next week on Tuesday is CPI for the inflation reading on the economy, a 10-Year TIPS Auction on Thursday, all setting the stage for one of the most important weeks of the year in terms of setting the tone for the remainder of the year in the Bond market.

Literally this last week in July trading week is going to either confirm or change many portfolio and trading strategies going forward for the second half of the year in our opinion. The FOMC meets on Tuesday July 29th, but Wednesday July 30th is the day that all traders need to mark on their calendars, this is probably the most important day of the year so far in 2014.

First we have the ADP Employment Report at 8:15 ET, followed by 2nd QTR GDP at 8:30 ET; so ADP gives the market the first look at the Employment Report for Friday of that week, and as we mentioned earlier the GDP report either confirms the 1st quarter GDP growth trajectory, or illustrates that this was an anomaly due to bad weather and inventory overhang issues. However, the trading day is just getting started as there is a 7-Year Note Auction at 1:00 PM ET followed by the FOMC Meeting Announcement at 2:00 PM ET, and depending upon the Employment and GDP data as the Fed will have both numbers going into their FOMC Meeting, we could get some fireworks in the form of changed language in the FOMC Statement if either of these numbers is extremely hot.

But the Econ Data doesn`t stop there as on Friday August 1st the Employment Report, Personal Income & Spending Report and two important Manufacturing Reports come out for traders to digest at the end of this market moving week of economic data.

In Summary: Trend Change or Status Quo?

Traders will not have to worry about low volumes and sleepy conditions during much of this week, and some markets like bonds will move in anticipation of the reports, and either enter a new trading pattern for the second half of the year, or continue with the status quo of buying bonds after the Yield Sensitive Econ Reports are out of the way for the next couple of weeks.

We literally have had 25 basis point moves in yields in the 10-Year the last couple of months in between the Monthly Employment Reports. The yields spike on good employment numbers, and then bond yield chasers push down yields like equities traders push down volatility in reaching for higher highs in the stock market!

We shall see if this time is different, as at some point there is going to be a sea change in bonds, and it is coming sooner rather than later, the question is does this last week in July and its important Econ Data finally cause the Sea-Change in Bonds? July 30th may end up being the most important trading day of the year in setting the stage for the remainder of 2014 for portfolio managers.

By EconMatters

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2014 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

EconMatters Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules