Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Soultrader

Any Bond Traders?

Recommended Posts

Im looking to learn the bond markets using simple strategies with market profile. James Dalton in his recent webinar held at LBRGROUP, mentioned how mp has its advantages with the 10 year notes and 30 year bonds because it is traded mainly by institutions.

 

I would like to receive some few pointers with the bond markets. Are there internals tools like TICK, TRIN, Prem for this market? I was told it was quite news sensitive. How liquid is the overnight and premarket session? Are there other financial instruments that a trader should follow with the bonds?

 

Thanks

Share this post


Link to post
Share on other sites

The bond markets have massive liquidity so that's seldomly an issue. Bonds move inversely to interest rate expectations so anything that increases the likelihood of rate increases (particularly higher inflation) will lower the price of bonds so there's big volatility around key economic releases like CPI and NFP. There are no internals as such because the underlying is a single instrument rather than an index. The only "internal" is interest rate expectations. The shorter term instruments are more responsive to economic news than longer term instruments. Consider CME Eurodollar for short term interest rates. Also there are bond futures for all countries so you might want to trade the Japanese 10 year bond or the German Bund.

Share this post


Link to post
Share on other sites

Bond is more trending and when it move it is more gentle then index market.

 

So if you are more of a trend trader, then bond could be a good fit. If you are a counter-trend trader, then you might have tougher time in this market.

 

my 2 cents.

Share this post


Link to post
Share on other sites
Guest cooter
Are there internals tools like TICK, TRIN, Prem for this market?

 

Depends on your definition of "internals".

 

$DJCBTI - this is the Dow Jones CBOT Treasury Index, a weighted representation of the 5, 10 and 30 year contracts.

 

CBOT - Treasury Dow Jones CBOT Treasury Index

 

$TYX.X, $TNX.X and $FVX.X - the 30, 10 and 5 year yields. They move inversely to the respective contracts. These are the quoted yields (with a multiplier of 10) used for interest rate options.

 

Interest Rate Options

 

http://www.cboe.com/LearnCenter/pdf/IRO.pdf

 

 

I was told it was quite news sensitive.

 

You heard correctly. Best to always keep in mind the 8:30am and 10am (EST) economic reports when trading. Use econoday or some other service to give you a list of these.

 

Try http://fidweek.econoday.com/ for a list.

 

How liquid is the overnight and premarket session?

 

Very liquid and deep at all times, including the US overnight and premarket session. How deep? Just look at the DOM (depth of market) after hours - many more contracts than the ES. Slippage (if any) is minimal, with a spread of no more than 1 tick wide.

 

Are there other financial instruments that a trader should follow with the bonds?

 

Sure. Asides from the 10 and 5 Year Treasury Notes, try looking at 30 Day Fed Funds, 1 Month Libor, Eurodollar futures.

 

More info here:

 

CBOT - Fed Funds 30 Day Fed Funds Quotes Open Auction

 

CME LIBOR Futures

 

CME Eurodollar Futures and CME Eurodollar Options

 

Thanks

 

My pleasure.

Share this post


Link to post
Share on other sites

I found bonds too boring. Not that it's a bad thing, but these things can take forever to move sometimes. Huge liquidity is nice, but I have to think there's a correlation between massive liquidity and smaller movements intraday.

Share this post


Link to post
Share on other sites

There's an exciting way and a boring way of trading bonds. The exciting way is to trade around economic numbers. Look at bonds around 0930 EST on NFP Friday and you won't say they're boring to trade. The boring way is to look for the longer term trend. Either way you need to combine auction theory with fundamental analysis. If you don't understand why core CPI coming in at 0.1% rather than 0.2% as expected increased the price of bonds then that's something you have to learn. It's not like stock index futures where there's a spike and then the market ignores the number.

 

It's not enough to get the economic number 10 seconds after release. Use a news squawk to get the release immediately. A good free one is www.NewsStrike.com.

Share this post


Link to post
Share on other sites

Bond markets are traded heavily by fund manager who run a geared fund. They constantly trade the bonds so that they can match the bond duration to the duration of their debts.

 

In terms of things that effect bonds, yes interest rate are the number one thing. But also other economic indicators such as the CPI (Consumer price index) and employment figures also have indirect effects. I.e: If employment rises, then income rises, then aggregate demand increases, which means more money floods the economy, which means inflation, which means interest rate rises! etc etc.

 

Longer term bonds due to "convexity" are more strongly effected by changes in discount rates (interest rates) due to the nature of bond prices. Depends as well as whether the bond is a 'zero' or a coupon bond. It's very very rare these days to find 'zero's in the market as they are usually OTC instruments.

 

Credit ratings are also important. For a higher return you want to trade Junk Bonds as the discounts off face are larger due to the poorer credit ratings.

 

If you keep track of S&P and Moody's reports on credit ratings this helps as well as one bad report can send the price of a bond tumbling!

 

Personally I find bond's very boring and there are way to many big players there which is kind of intimidating. As for indicators such as TICK etc i dont think they apply to bonds cause they are not based on any underlying stock index.

 

Hope that little bit helps.

Share this post


Link to post
Share on other sites

Does anyone here trade the 3-Month Sterling (Short Sterling) Futures contract on LIFFE? I'm interested to know who the big players are and why they trade it.

 

The standard contract size is £500,000 and the price is based on what the LIBOR rate is predicted to be on the day of settlement. Just like bonds, the price moves inversely to the yield which is 100-x. The minimum tick size is 0.01 which corresponds to a £12.50 change in price.

 

For example, if you were betting the Bank of England was going to surprise the market by raising the base rate, you would take a short postion. You sell at a price of 95.00 (LIBOR 5%) and a few weeks later the BOE raises rates by 25 basis points. The LIBOR rate moves to 5.25% and you buy the contract back making a profit of £312.50.

 

(95.00-94.75)/100*£500,000*3/12 = £312.50

Share this post


Link to post
Share on other sites

I keep my eye on short sterling. It's traded by hedgers and speculators. Hedgers are banks, insurance companies, mutual funds, pension funds and anyone who wants to hedge against interest rate risk. Speculators are hedge funds, investment banks and large traders. You can also trade Gilt which is the equivalent of the US Treasury Bond. Participants are mostly institutional rather than retail.

Share this post


Link to post
Share on other sites

Regarding bond markets in general: Are there any seasonal factors at work? As we draw to the close of Q2 earnings season, will bond markets take on a more bid tone as investors withdraw from stocks and park their money somewhere less risky over the summer period.

Share this post


Link to post
Share on other sites

Rotation from stocks to bonds is always a factor but there are no "no brainer" trades. Who's putting money on the stock market rally to end any time soon? Interest rate expectations is what it all comes down to for bonds.

Share this post


Link to post
Share on other sites
Thank you for the information guys. I really appreciate it. Been observing the 30year bonds and it sure is slow. It does seem to respect MP levels though.

 

Soultrader - What strategy have you determined might be effective using Market Profile and US 30 Year Bonds?

Share this post


Link to post
Share on other sites

That is a great question. I am also looking to get MP strategies to couple with 30 year bond futures. I have been trading the bonds for awhile now but I am new to market profile. Seems to be a good fit. The 30 year bonds offer a great bang to buck ratio... bonds have been moving 12-30 ticks per day on a trending day at 31.25 per tick per contract...not bad.

I assume the value area strategies should work using VAH, VAL, POC, single prints, etc....can anyone offer ant help?

thanks.

Share this post


Link to post
Share on other sites

where do I start for what can become a very lengthy subject.

Any LIBOR based contract whether Short Sterling, Euribor, EuroDollars, EuroSwiss or 3 month Yen of which there are several genres are primarily the domain of the big banks but as previously posted really just about any type of institution is willing to be involved. This is still despite the electronicmogification of the marketplace still a product where the local (albeit upstairs now) is still a major player The volumes transacted are huge and the capability in the LIBORS to be able to trade the packs (groups of 4 quarterly contracts) to create yield curve and TED spread strategies adds to the appeal. The major influence in options these days is likely the hedge funds.

The purpose of the product is to offer a hedging capabilty against or for a directional move in short term interest rates but of course like any tradeable product the spec are just as likely to be involved as they try to anticipate the Central Bank's next move.

Share this post


Link to post
Share on other sites

the LIBORS if spread on an inter-market basis mixed in with opposite risk trades in bond markets also offer interesting alternative strategies to trading currencies outright but again this is an area that one could almost write a book on. What I am trying to say is that to their are many different ways to create a currency trade without using the FX

Share this post


Link to post
Share on other sites

The 30 year or Long Bond or T.Bond has always had a 90% plus MP or Market Profile correlation. The bond markets were in essence the first guys to really take to MP back in the 1980s and I don't know anyone who trades bond markets again whether that be US, EU, UK or Japanese as these are primarily where the main futures markets are who doesn't have a MP chart up all the time.

as for saying that the 30 yr is slow I think that is a matter of being in the eye of the beholder and suggests something about their trading style.

obviously taking different data sets from the Data Warehouse will produce slightly different results. For example taking S&P since inception in 1982 then the daily ATR is 9.44 per day but taking just 2008 then its 30.56. Doing the same excercise in the T.Bonds starting again with inception since 1977 the daily ATR is 24/32 but taking just 2008 then its 33/32 (1-1/32). The Nice thing about Bond markets is the ability to trade the curve postioning 2 year vs 5 year vs 10 year vs 30 yr in the US and Europe where saily volumes are almost obscene.

Note that the T.bond will move from being traded in 1 tic increments 1/32nd to half tics from March 3rd. Likely impact I am sure will be higher volumes as the flipper brigade spin their wheels looking at the 5 minute voodoo chart even more

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • TDUP ThredUp stock, watch for a top of range breakout above 2.94 at https://stockconsultant.com/?TDUP
    • TDUP ThredUp stock, watch for a top of range breakout above 2.94 at https://stockconsultant.com/?TDUP
    • NFLX Netflix stock watch, local support and resistance areas at 838.12 and 880.5 at https://stockconsultant.com/?NFLX
    • Date: 8th April 2025.   Markets Rebound Cautiously as US-China Tariff Tensions Deepen     Global markets staged a tentative recovery on Tuesday following a wave of volatility sparked by escalating trade tensions between the United States and China. The Asia-Pacific region showed signs of stability after a chaotic start to the week—though some pockets remained under pressure. Taiwan’s Taiex dropped 4.4%, dragged lower by losses in tech heavyweight TSMC. The world’s largest chipmaker fell another 4% on Tuesday and has now slumped 13.5% since April 2, when US President Donald Trump first unveiled what he called ‘Liberation Day’ tariffs.   However, broader sentiment across the region turned more positive, with several markets rebounding sharply after Monday’s dramatic sell-offs. Japan’s Nikkei 225 surged over 6% in early trading, rebounding from an 18-month low. South Korea’s Kospi rose marginally, and Australia’s ASX 200 gained 1.9%, driven by strength in mining stocks. Hong Kong’s Hang Seng rose 1.6%, though still far from recovering from Monday’s 13.2% crash—its worst day since the 1997 Asian financial crisis. China’s Shanghai Composite added 0.9%.   In Europe, DAX and FTSE 100 are up more than 1% in opening trade. EU Commission President von der Leyen repeated yesterday that the EU had offered reciprocal zero tariffs on manufactured goods previously and continues to stand by that offer. Others are also trying again to talk to Trump to get some sort of agreement that limits the impact.   Much of the rally appeared to be driven by dip-buying, as well as hopes that the intensifying trade war could still be defused through negotiations.   China Strikes Back: ‘We Will Fight to the End’   Tensions reached a boiling point after Trump threatened to impose an additional 50% tariff on all Chinese imports unless Beijing rolled back its retaliatory measures by April 8. ‘If China does not withdraw its 34% increase above their already long-term trading abuses by tomorrow... the United States will impose additional tariffs on China of 50%,’ Trump declared on social media.   If implemented, the new tariffs would bring total US duties on Chinese goods to a staggering 124%, factoring in the existing 20%, the 34% recently announced, and the proposed 50%.   In response, China’s Ministry of Commerce issued a stern warning, stating: ‘The US threat to escalate tariffs is a mistake on top of a mistake... If the US insists on its own way, China will fight to the end.’ The ministry also called for equal and respectful dialogue, though signs of compromise on either side remain scarce.   Beijing acted quickly to contain a market fallout. State funds intervened to support equities, and the People’s Bank of China set the yuan fixing at its weakest level since September 2023 to boost export competitiveness. Additionally, five-year interest rate swaps in China fell to their lowest levels since 2020, indicating potential for further monetary easing.   Trump Talks Tough on EU Too   Trump’s hardline approach extended beyond China. Speaking at a press conference, he rejected the European Union’s offer to eliminate tariffs on cars and industrial goods, accusing the bloc of ‘being very bad to us.’ He insisted that Europe would need to source its energy from the US, claiming the US could ‘knock off $350 billion in one week.’   The EU, meanwhile, backed away from a proposed 50% retaliatory tariff on American whiskey, opting instead for 25% duties on selected US goods in response to Trump’s steel and aluminium tariffs.     Volatile Wall Street Adds to the Drama   Wall Street experienced wild swings on Monday as investors processed the rapidly evolving trade conflict. The S&P 500 briefly fell 4.7% before rebounding 3.4%, nearly erasing its losses in what could have been its biggest one-day jump in years—if it had held. The Dow Jones Industrial Average sank by as much as 1,700 points early in the day but later climbed nearly 900 points before closing 349 points lower, down 0.9%. The Nasdaq ended up 0.1%.   The brief rally was fueled by a false rumour that Trump was considering a 90-day pause on tariffs—rumours that the White House quickly labelled ‘fake news.’ The market's sharp reaction underscored how desperate investors are for any sign that tensions might ease.   Oil Markets in Focus: Goldman Sachs Revises Forecasts   Crude prices also reflected the uncertainty, with US crude briefly dipping below $60 per barrel for the first time since 2021. As of early Tuesday, Brent crude was trading at $64.72, while WTI hovered around $61.26.   Goldman Sachs, in a note dated April 7, lowered its average price forecasts for Brent and WTI through 2025 and 2026, citing mounting recession risks and the potential for higher-than-expected supply from OPEC+.       Under a base-case scenario where the US avoids a recession and tariffs are reduced significantly before the April 9 implementation date, Goldman sees Brent at $62 per barrel and WTI at $58 by December 2025. These figures fall further to $55 and $51, respectively, by the end of 2026. This outlook also assumes moderate output increases from eight OPEC+ countries, with incremental boosts of 130,000–140,000 barrels per day in June and July.   However, should the US slip into a typical recession and OPEC production aligns with the bank’s baseline assumptions, Brent could retreat to $58 by the end of this year and to $50 by December 2026.   In a more bearish scenario involving a global GDP slowdown and no change to OPEC+ output levels, Brent prices might fall to $54 by year-end and $45 by late 2026. The most extreme projection—based on a simultaneous economic downturn and a full reversal of OPEC+ production cuts—would see Brent plunge to below $40 per barrel by the end of 2026.   Goldman noted that oil prices could outperform forecasts significantly if there was a dramatic shift in tariff policy and a surprise in global demand recovery.   Cautious Optimism, But Warnings Persist   With both Washington and Beijing showing no signs of backing down, markets are likely to remain volatile in the days ahead. Investors now turn their attention to upcoming trade meetings and policy decisions, hoping for clarity in what has become one of the most unpredictable trading environments in recent years.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • CVNA Carvana stock watch, rebound to 166.56 support area at https://stockconsultant.com/?CVNA
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.