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Friday, October 18, 2024
The Yield Play: Long-Term Bonds Benefit as Interest Rates Dip
تم إعداد هذا المنشور من قبل سنشري للاستشارات
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U.S. Treasury Bond Ultra: Product Details
The U.S. Treasury Bond Ultra is a futures contract that tracks the price movement of the most recently issued 25-year and 30-year U.S. Treasury bonds. Investors can use it to hedge their risk against rising interest rates or to speculate on the direction of bond prices. Futures contracts for the U.S. Treasury Bond Ultra are available on both the Century Trade and TradeUltra platforms.
| Contract Specification | |
|---|---|
| Underlying | U.S. 30-Year 6% Bond |
| Contract Size | $100,000 |
Source: Bloomberg
Date: 16th October 2024
Fed: The Path Ahead
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The U.S. economy has held up remarkably well despite a challenging macroeconomic backdrop marred with geopolitical tensions in the Mideast, sluggishness in the U.S. housing and manufacturing sectors, and uncertainty pertaining to the upcoming U.S. presidential elections.
The Federal Reserve kickstarted its monetary easing cycle on a strong footing – initiating a 50-bps rate cut in September and lowering the fed funds target rate to a range between 4.75% to 5.00%.
Economic reports in the aftermath of the September FOMC have painted a mixed picture about the health of the U.S. economy, particularly the labor market. For starters, the unemployment rate ticked slightly lower to 4.1% while non-farm payrolls blew past expectations with a total of 254,000 in September. This alleviated concerns about a teetering labor market and reinforced the Fed’s soft-landing narrative. Meanwhile, headline inflation in the U.S. accelerated at a slightly higher-than-expected rate of 2.4% in September. By virtue of these strong economic reports, markets had to considerably lower expectations of a 50-bps rate cut in November. Nevertheless, with two FOMC meetings remaining this year and about 45-50 bps rate cuts priced in for the remainder of 2024, there is a chance of seeing a quarter point reduction at each rate-setting meeting, supporting the outlook for U.S. Treasury Bond Ultra.
Euro Buxl: Product Details
The Euro Buxl futures are a natural complement to the EU bonds market , offering traders and investors a direct means to manage their long-term interest rate risk and portfolio duration. Euro Buxl futures ("Buxl”) consist of cash Euro bonds with at least 24 to 35 years of remaining term to maturity. This product is available on the Century Trader platform under the description “Euro Buxl - Cash” and the Ticker “EUROBUXL.”
| Contract Specification | |
|---|---|
| Underlying | German 30-Year 4% Bond |
| Contract Size | EUR 100,000 |
Source: Bloomberg
Date: 16th October 2024
ECB: The Path Ahead
The European Central Bank is set to implement its third interest rate cut for the year at its upcoming meeting, as officials note that inflation risks are diminishing more rapidly than previously anticipated. In September, headline inflation in the euro area eased to 1.8%, falling below the central bank's 2% objective. Core inflation, which excludes the more volatile elements like energy, food, alcohol, and tobacco, reached a 2.7% from a previous 2.8%.
Anticipation for a swifter monetary easing process has increased since the ECB meeting on September 12, following a string of dovish remarks from officials and lower-than-expected inflation reports from eurozone countries, including Germany. The expectation of consecutive rate cuts has also been heightened by the ongoing sluggishness in economic activity across the eurozone.
The composite purchasing managers' index data, assessing services and manufacturing activity, indicates stagnation in the third quarter following modest 0.3% growth in the second quarter. This projection is influenced by a cooling labor market and slower wage growth, which are anticipated to push down services inflation in the upcoming months. Analysts foresee this as the beginning of an accelerated path towards 2% rates by June 2025 and further down to 1.5% by the end of 2025. This outlook supports a positive sentiment for Buxl prices.
U.S. Treasury Bond Ultra
Regression Analysis
Regression analysis is a useful tool for assessing the strength of relationships between di erent variables and modelling how these relationships will evolve in the future. The model below forecasts the movement in the T-Bond Ultra’s price when the 30-year U.S. government yield changes.
As of 16th October 2024, the regression equation over two years is as follows:
Y = -20.067 X + 214.017
The standard deviation of error is 1.326, and the study assumes a 90% confidence interval.
Scenario Analysis
| Change in Yield | Estimated U.S. 30-Year Government Bond Yield | Estimated T-Bond Ultra Price | Estimated % Change in T-Bond Ultra | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Current Levels | 4.28% | $129.66 | Base Case | ||||||
| Yield Decreases by 75 bps | 3.53% | $146.40 | 12.91% | ||||||
| Yield Decreases by 150 bps | 2.78% | $161.45 | 24.52% | ||||||
| Yield Increases by 75 bps | 5.03% | $116.30 | -10.30% | ||||||
| Yield Increases by 150 bps | 5.78% | $101.25 | -21.91% | ||||||
Source: Bloomberg
Date: 16th October 2024
The table above demonstrates the inverse relationship between the T-Bond Ultra’s price and the 30-year US government bond yield. If the yield declines by 75 bps to 3.53%, the bond price is projected to rise to $146.40 Conversely, if the yield increases by 75 bps to 5.03%, the bond price is expected to fall to $116.30.
Euro-Buxl
Regression Analysis
The model below forecasts the Euro Buxl’s price movement when the 30-year German government yield changes.
As of 16th October 2024, the regression equation over two years is as follows:
Y = -29.522 X + 209.724
The standard deviation of error is 1.250, and the study assumes a 90% confidence interval.
Scenario Analysis
| Change in Yield | Estimated German 30-Year Government Bond Yield | Estimated Euro-Buxl Price | Estimated % Change in Euro-Buxl's Price | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Current Levels | 2.47% | € 135.48 | Base Case | ||||||
| Yield Decreases by 75 bps | 1.72% | € 161.96 | 19.54% | ||||||
| Yield Decreases by 150 bps | 0.97% | € 184.10 | 35.89% | ||||||
| Yield Increases by 75 bps | 3.22% | € 117.68 | -13.14% | ||||||
| Yield Increases by 150 bps | 3.97% | € 95.54 | -29.48% | ||||||
Source: Bloomberg
Date: 16th October 2024
The table above demonstrates the inverse relationship between the Euro Buxl’s price and the 30-year German government bond yield. If the yield declines by 75 bps to 1.72%, the bond price is projected to rise to €161.96. Conversely, if the yield increases by 75 bps to 3.22%, the bond price is expected to fall to €117.68.
Risks and Assumptions for Back-tested trading strategies
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تنظمها هيئة الأوراق المالية والسلع
سنشري للاستشارات المالي ش.ذ.م.م
تصل إلينا:
-
دبي
الطابق رقم 6, مبنى رقم 4, ساحة إعمار دبي
وسط مدينة دبي، ص.ب: 65777،
دبي، الإمارات العربية المتحدة -
أبوظبي
مكتب 3014، الطابق 30
برج طموح، مبنى 12، مارينا سكوير،
جزيرة الريم، أبوظبي - +971 (4) 356 2800
- info@century.ae
Century Financial is the presenting sponsor of
يتضمن التداول في منتجات المشتقات باستخدام الرافعة المالية خارج البورصة، بما في ذلك العقود مقابل الفروقات وعقود الصرف الفوري للعملات الأجنبية، وينطوي على مخاطر خسارة كبيرة قد تفوق الودائع وربما لا يناسب جميع المستثمرين. وتُعد منتجات المشتقات المالية خارج البورصة / العقود مقابل الفروقات هي أدوات مالية معقدة لا تمنح أي مطالبة أو حق إلى الأداة المالية الأساسية. والتعاملات بهذه الأدوات خطرة جداً، ويتعين عليك التداول فقط برأس المال الذي يمكنك تحمّل خسارته. وقبل أن تقرر التداول في هذه المنتجات، يتعين عليك النظر في أهدافك الاستثمارية وتحمّلك للمخاطر ومستوى خبرتك. وتبعاً لذلك، يتعين عليك أن تتأكد من فهمك للمخاطر ذات الصلة وأن تطلب مشورة مستقلة من المتخصصين إن لزم الأمر.
سنشري للاستشارات والتحليل المالي ش.ذ.م.م (سنشري) هي شركة مرخصة حسب الأصول ومنظمة من قِبل هيئة الأوراق المالية والسلع في دولة الإمارات العربية المتحدة (هيئة الأوراق المالية والسلع) بموجب الرخصة رقم 20200000028، 20200000081و301044 لمزاولة أنشطة وسيط التداول في الأسواق العالمية، ووسيط التداول للمشتقات المالية خارج البورصة والعملات في السوق الفورية، وخدمات التعريف والإحالة والاستشارات المالية والتحليل المالي، والترويج. كما أن سنشري هي شركة ذات مسؤولية محدودة تأسست بموجب قوانين دولة الإمارات العربية المتحدة ومسجلة لدى دائرة التنمية الاقتصادية في دبي (رقم تسجيلها 768189) ويقع مكتبها المعتمد في 601، الطابق 6، المبنى 4، إعمار سكوير، داون تاون، دبي، الإمارات العربية المتحدة، ص.ب: 65777.
يتم تقديم أي محتوى متاح على موقعنا الإلكتروني فقط لتوفير المعلومات وتثقيف الزوار. ولا يجوز تحت أي ظرف من الظروف تفسير أيً من هذا المحتوى على أنه عرض أو توصية أو مشورة أو التماس لشراء أو بيع الأوراق المالية أو غيرها من المنتجات المالية.
معلومات هذا الموقع الإلكتروني غير مخصصة للاستخدام من قِبل أي شخص مقيم خارج دولة الإمارات العربية المتحدة أو حيث يخالف هذا الاستخدام القوانين أو اللوائح المحلية.
