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Chart Of The Day: Reversal In The Debt Complex

By  |  Bonds  |  Aug 25, 2013 04:30AM GMT  |   Add a Comment
 
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Since establishing an interim top, this has been a one way trade as of the beginning of May where the long end and short end of the curve has each gotten hit. 30-yr bonds have depreciated 12%, 10-yr notes are lower by 7% and the March 16’ Eurodollar futures are lower by 1.3%.

Lets quantify this: What are the margins for these three instruments and what does this price action mean for (1) futures contracts? Please do not think I am implying that all my clients got short and stayed with this trade for the last 4 months. That is not the message I am trying to convey.

30-yr Bonds:
  • Initial margin - $2,750
  • Maintenance margin - $2,500
  • Close to close for 5/2 to 8/22 - $17,875
10-yr Notes:
  • Initial margin - $1,623
  • Maintenance margin - $1,475
  • Close to close for 5/2 to 8/22 -$8,609
Eurodollars:
  • Initial margin - $880
  • Maintenance margin - $800
  • Close to close for 5/2 to 8/22 -$3,050
From current levels, I think we get a rebound in the debt complex and I have put three charts of the instruments I trade in this complex below. I expect a trade higher in the coming weeks lifting futures to the resistance levels (the red horizontal lines) I drew in each chart. I open the idea of a rally and will use higher trade to scale clients into bearish trade going into the FOMC meeting in mid-September. My favored play remains trading the short end of the curve; '16 Eurodollar futures and options.

Over the next several years I do expect the path of least resistance in the debt complex to be lower, so traders should use an advancement in the coming weeks to exit remaining longs and to gain bearish exposure.

30-yr Bonds:
Bonds
Bonds

10-yr Notes:
Notes
Notes

March 16’ Eurodollars:
Eurodollars
Eurodollars

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