Are yields about to blow out?
The July monthly close in 10-year futures edged through rising trendline support, a level aligning with a 4.0% yield (highlighted with the yellow shaded ellipse). Is Treasury weakness through the end of July a precursor of continued selling and a blowout in yields? The CME's FedWatch Tool shows only a 20% probability the Federal Reserve hikes in September. Given resilient growth in the U.S. and shrinking Initial Jobless Claims, are those odds too low? The fear would be this probability rises to 50%. In such a case, 10-year futures would have incurred continued selling, finding added weakness due to the trend line break. Although there is additional support from a trendline from March 2002 and the Q4 2007 rally that will try to buoy selling, the Treasury complex is at a critical inflection point and a continued breakdown (or rising yields) would become a direct headwind to the risk-landscape, likely creating downward pressure in equity indices and precious metals.
In the coming days, ISM Non-Manufacturing data for July is released Thursday at 9:00 am CT. This measures the services sector which has been extremely resilient and a source of stubborn inflation. On Friday, Nonfarm Payrolls for July are due at 7:30 am CT. The job market as remained tight, supporting wages, another factor of inflation. If these data points come in hotter than expected, one would imagine the 10-year sees continued selling. Regardless of the outcome, traders must keep an eye on 10-year futures in order to keep a pulse on the risk-landsacpe.
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Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
In the coming days, ISM Non-Manufacturing data for July is released Thursday at 9:00 am CT. This measures the services sector which has been extremely resilient and a source of stubborn inflation. On Friday, Nonfarm Payrolls for July are due at 7:30 am CT. The job market as remained tight, supporting wages, another factor of inflation. If these data points come in hotter than expected, one would imagine the 10-year sees continued selling. Regardless of the outcome, traders must keep an eye on 10-year futures in order to keep a pulse on the risk-landsacpe.
tradingview.com/cme/
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
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