Today's 7 year auction was almost the complete opposite of yesterday's, fortunately for me ZF was making and trading right around the LOD before the auction so I didn't go short a second time, dodging a bullet as it climbed 59 points in about 30 minutes. Besides auctions, what other regular news items have the opportunity to move bonds to this degree? How about tomorrow's GDP announcement, I presume a bullish GDP would normally be bearish for bonds?
Payrolls is the first such announcement that comes to mind. I don't think GDP is normally massively significant, but it might be tomorrow, 'cause there's a lot of uncertainty.
Today's GDP news was better than expected but still triggered a 9 point drop in ES and a 45 tick gain in the ZF within 8 minutes. I'll definitely be adding these announcements to my news tracking for the ZF, as I expect similar results in the future at least until markets return to normal - sometime in 2013.
I don't think it was so much the GDP. It was the consumption figures and the revisions to the previous quarter's number.
I got lucky again today by paper trading the 3-year auction at 1pm, here was the preview (from TradeTheNews): Preview: Treasury's $37B 3-year note auction results due out just after 1PM ET - $37B is a $2B increase over July auction - prior bid-to-cover ratio 2.62 with an average of 2.53 over the last 10 auctions - indirect bidders took 54% of competitive bids at last auction with 76.3% alotted at the high - the 1.77% yield on the when issued note trades roughly 5 basis points above cash And the result: *TREASURY'S $37B 3-YEAR NOTE AUCTION BID-TO-COVER RATIO: 2.89 V 2.62 PRIOR AND 2.53 AVG OVER THE LAST 10 AUCTIONS - indirect bidders take 62.5% of competitive bids - notes draw 1.78% with 13.08% allotted at high And the resulting 1m chart for the 5 year note: On the surface this seems like a very positive auction, with a high B/C ratio and high % of competitive bids, however the market didn't respond. I'd be interested in hearing opinions on why this particular auction affected the 5 year futures the way it did, as it seemed very bullish to me but just didn't turn out that way.
1) Luck doesn't matter in paper trading. It can matter in actual trading. 2) The "spike" in the market at 12:01pm (Chicago Time) was the markets response to the auction news. The market already rallied decently yesterday and so far today. 3) There are two more auctions pending and the FOMC announcement tomorrow afternoon. The market should be calm the rest of today and tomorrow morning. Generally, the market should bottom out at noon on Thursday when the "window closes" for the 30-year. The primary dealers will want to cover their short-hedges and then rally the market with all of the new securities that have been auctioned. We'll see.
Hate to say it but trading is competitive. If u have something that is working KEEP IT TO YOURSELF is the best policy. U don't think it matters but when u start noticing more stop outs, false breakouts, etc, it is because to many "gamers" are trying to ride the same wave. Don't be a dummy.
Well I didn't think trading bond futures on auction results was any sort of a secret, but if it was, I guess the cat's out of the bag now! What I meant by luck was that I just upgraded to the newest version of my trading software and I always spend a day or two paper trading to ensure my regular trades work without a hitch, normally I would have used my live account to go long on ZF with these auction results and ended up with a moderate loss. Re the pending auctions, presumably some auctions move markets more than others? I would expect the 30 year to be the biggest market mover with oddballs like the 7 and 3 year to carry less weight, but I was surprised 2 weeks ago when the 7 year auction was a big success and sparked a broad rally in bond markets, which is one of the reasons I was expecting more out of this 3 year auction. What if any of the bond auctions should I pay the most attention to, and which can generally be ignored? Finally with respect to the FOMC decision, consensus I'm hearing everywhere is that rates will be unchanged. If this comes to pass I would expect a resulting dip in equity markets with a rally in bonds, any comments? At any rate it should definitely be a busy week for trading bond futures!
1) They are all "important", the 30-year being the most. 2) With the FOMC, you want to be cognizant of the additional "wording" that's added after the rate decision is announced. Try not to get hung up on anything that is "supposed" to be bullish or bearish.
I decided to sit on hands for the FOMC announcement today at 2:15pm EST and I'm glad I did: That's a 95 tick swing on 30 year bond futures in one minute. Unfortunately I can't really make use of a trade like this but at least I know now to close my bond positions before the FOMC announcements (I had guessed as much beforehand but this example really drives it home). I'm looking forward to tomorrow morning's retail sales and jobs data, I'm expecting a bullish result on both counts but with all the other news this week it's hard to say how much that positive expectation is already priced in - I certainly won't be placing any bets before 8:30.