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Inter Market Analysis

Inter market analysis is a series of articles studying related segments of the market to identify lead lags between trends in each segment. This can often forewarn you of impending changes in trend and allow for planning of required action based on it. For example midcaps v/s large caps, currencies v/s commodities and US markets v/s European markets and so on. In a global environment inter-market relationships are not restricted to a country but between countries and their respective asset classes as well.

US 30 Year Bonds

I am watching this as it maybe important, 30 year bond yields are starting to take off behind the 2 year. Bond markets move slowly so the moves do not get recognised till much later by the market.

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US 2 year Treasury Notes

The 2 year bond yields were the lead indicator all of last year for rising interest rates. The FED raises short term interest rates that first reflect here in sentiment. The continues rise in these yields eventually pulled up the 10/30 year bond yields as well but at a slower pace. This slower pace is leading to what many are calling a inversion in the yields curve. A full inversion has not happened yet but we are close. Inversion is when short term bond yields go above long term ones like the 2-10 yield spread goes negative. In any case last night the 2 year bond yields managed to breakout to a new high for the year. This should mark the start of a new trend in rising yields that I have been writing about and eventually interest rates will rise across durations.

PicsArt 07-18-08.07.41

US 2 year Treasury Notes

US 2 year notes made a new low even as 2 year yields are just below 52 week highs. One more push needed and we breakout in yields as well. The 2 year bond yields have been far more sticky than the 10 year and for that reason it is causing the yield spreads to tighten. The highest impact of FED rate hikes too is on short term rates.

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