What is wrong with the Treasury Market?

Discussion in 'Index Futures' started by LivermoreRisen, Jan 19, 2006.

  1. Seems like there is a direct relationship between the debt futures and the YM and DOW rather than an inverse one. What is up with that? any opinions?


    BTW, my question comes after having major losses because of my faith in the inverse relationship economics tells us there shoudl be. My second day trading and -$1200 trading 1, 3, and 6 lots in ZN....whew....someone tell me its gonna be okay...:(

    Anyone make money today trading ZF, ZN, or ZB?
  2. trainr


    Generally, if rates fall, bonds rise, so that yields stay equivalent to new debt. In other words, a bond with a higher yield than new debt looks under-priced and rises.

    Also, stocks rise because lower rates are good for the economy.

    So, bonds and stocks often move together, not contrary-wise.
  3. Thanks so much for that clarification. Can you define new debt? thanks

    ALso, how does this relate to the yield curve?
  4. niting


    I shorted 1 contract of ZB this morning at 114 22/32 and covered at 114 12/32 for a profit of 300 dollars.
  5. Urkel


    stop trying to trade bonds based off of the stock market, bond market is being driven by factors other than the stock market.
  6. That's funny. I was long during that green bar in ZN. up $287 gross with like 2 R/Ts. Problem is, I didn't take the profit. I guess I was hoping for astronomical gains.
  7. Thank you so much for that info. What factors should I look at more closely? CRUDE OIL has had a direct relationship with DEBT lately (at least I think so). What else?
  8. landboy


    Long end of the curve is influenced by inflation mostly... short end is mostly influenced by the Fed
  9. trainr


    Yeah. When interest rates are announced it impacts the issuance of new bonds from the gov. Since bonds already trading have to compete with these new bonds freshly minted, higher rates on new debt (bonds) cause existing bonds to fall in value, and vice versa; the relationship is inverted.

    If you have 2 bonds, one old with lower yield and one new with higher yield, each paying 1000 at maturity, which would you pay more for now -- the higher yielding one or the lower one? Since you would pay more for the new bond and it costs 1000, you would drop the price of the old to get equivalent yield.

    A yeild curve is just a representation of yields of varying maturities. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities (generally true). A negative sloping curve has higher interest rates at the shorter maturities.
  10. well, if anyone is interested, i will attach my trading report for the last two days. I started trading on Wednesday

    Wednesday: +$60 minus $40 in commissions
    THURSDAY: -$1171.88 minus $115 or so in commissions

    You'll see that most of my trades are losers but my winners can sometimes be huge and offset the losers. Of course, today, there were just a lot of losers. I don't think there was any move I made right. I could have taken a profit of $287 on a three lot early in the morning but chose to just let it ride instead...I rode it up and then rode it back down....I'm unbelievable sometimes...

    What should my daily loss limit be on a $20,000 account trading 6 lots at a time?

    Any advice would be appreciated

    #10     Jan 19, 2006