US Treasury Notes

[Neuroway]

Hi folks,

I am a trader by trade. A scientist working with facts, numbers and statistics. Not beliefs, crystal balls, feelings or uneducated opinions. I don't predict the markets. I trade them just like I play chess.

Enough about myself. I have been trading US T-Notes for years and I notice that they always go down, down, down and even more low. They seem to be headed to $0. Never up. Unlike the German Bund or whatever governement issued paper in Europe and the rest of the world.

Yes, of course, they are not a bad thing to trade. For the bears, on the short side.

But why are they such a piece of junk? I mean, why are they so bearish? Isn't the US economy supposed to be good? Shouldn't that have, as a consequence, a positive effect on its government-issued papers?

I have never seen such a crappy, bearish asset in my whole life, except perhaps TRMP, the Trump-owned stock, which went from $34 to $0 in less than 10 years.

So my questions, again:

1) Why are US T-Notes so bearish?

2) Why is such a "strong" US economy affecting the T-Notes in such a negative way?

Thanks,

N.

 

[Neuroway]

Here is a better pic to illustrate my perplexity. Basically, the US-Treasury 10Y Note, this worthless piece of junk, has been going down non-stop for basically 40 years. Much more than my entire career. As surely as Warren Buffett traded the stock market, I trade the US T-Notes.

What are the mechanics behind this mother of all bears? To what strong economic laws does it obey? I'd like to understand this.

 

[maxinger]

I focus on technical, not fundamental.

Quite a nice downtrend.
those who shorted it should be happy.
only problem is the bond / notes day range is extremely small.

 

[sle]

Enough about myself. I have been trading US T-Notes for years and I notice that they always go down, down, down and even more low.

What are you talking about? We had a selloff in the front of the curve over the last couple years because of the Fed (you know, they were hiking rates), but certainly not "for years" and not always.

 

[Neuroway]

I focus on technical, not fundamental.

Quite a nice downtrend.
those who shorted it should be happy.
only problem is the bond / notes day range is extremely small.

I focus on technicals too. I'm an engineer in Computer Sciences, with a M.A.Sc. in Artificial Intelligence. I know nothing about economics. So basically my opinion about economic fundamentals has the same value as Trump's opinion about Global Warming.

I'm very happy with the shorting so far. Small range is not a problem for my systems, since they adjust their leverage proportionally to the volatility of an asset. So T-Notes have small volatility, but my systems trade them using more leverage than say, for the EUR/USD.

 

[Neuroway]

What are you talking about? We had a selloff in the front of the curve over the last couple years because of the Fed (you know, they were hiking rates), but certainly not "for years" and not always.

You seem right. The price of T-Notes doesn't seem as bearish as the interest rate on them, at least going back before 2016. But in any case, it doesn't even cope for the inflation rate and T-Notes are not fit for anything except shorting them with high leverage, in my opinion. I really wonder why they exist at all. They seem even worse performers (from an investment perspecrive, not a trading one) than paper money.

 

[Kevin Schmit]

You seem right. The price of T-Notes doesn't seem as bearish as the interest rate on them,

You do understand that rates and notes move in opposite directions, right? Rates up = notes down. Your first posted chart was in rates, but you are talking about trading the notes (or note futures) themselves.

The implied duration of the 10yr Note Future (current CTD is the 20250731 2.875%) puts it very near the "fulcrum" of the curve, so its a decent surrogate for the overall level (first PC of curve). If the Fed continues to raise short rates the price of the Note will likely continue to fall. If not (i.e. we see an inverted or flat yield curve), then that is not a good economic sign.

 

[clacy]

Have you not looked at a long term interest rate chart? I can't believe someone who's traded US notes for years wouldn't already know the answer to your question.

This downtrend may just be getting started.

 

[Neuroway]

Hmm... I posted a pic with the interest rates since 1954. This is quite very much long term indeed, I believe. I'm not a notes specialist. I trade notes for more than 2 years like I trade anything else. Based on a combination of AI pattern recognition, short-term trend, mean regression and volatility.

I trade notes together with 150+ other assets (precious metals, forex, indices, etc...) Since my positions increase in size like a snowball as the trend gets stronger and longer, I noticed that my AI built huge positions on notes over time, which was not the case with other assets. This is why it grabbed my attention and my curiosity. This is the most steady trend I've seen by far in the last 2 years. So perfect you could almost blindly trade it on the short side.

 

[fan27]

Since my positions increase in size like a snowball as the trend gets stronger and longer, I noticed that my AI built huge positions on notes over time, which was not the case with other assets. This is why it grabbed my attention and my curiosity.

Yeah. I think my curiosity would also be peaked and attention grabbed if my AI built up huge positions with a futures contract.