Every week, we intend to publish commentary on various Government Bond Yield Curves, both as individual curves, and also analyse the movement of spreads between them.
In these examples,we will overlay one of our Trend following models on a particular segment of each of the curves and highlight the most recent trading entry & exit signals.
Today, we explore 2 yr versus 10 yr on both the Eur and USA curves (Weekly) going back to 2004 and also take a look at the 10 yr spread between both curves. The Chart is colour coded for illustration as follows:
Blue:=Flattening Black:=Neutral Red=Steepening* (2's outperform 10's)
Chart 1 [Click to enlarge]
In August, most Fixed Interest continued to push higher (in price terms, lower yields) while Equity markets weakened but it is interesting to note an acceleration in the change in the front segment of Curves
eg: Eur 2's 10's flattening from -220 bps on 31 May to current -157 bps.
We are not interested in any fundamental justification and timing for such a move, only a cold statistical analysis of the price behaviour
Curve Segment: Eur 2yr v's Eur 10 yr
Trend : Flattening (2's underperform)
Entry signal 24/5/10 -218 bps
Current: -157 bps
Resistance: -151 bps
Support : -168 bp
Exit Signal: none
