Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


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