In this edition of the MTA Chart of the Week, Jeffery E. Lay, CMT reviews the current price action in US Treasury futures.
Current price action in the weekly chart above demonstrates the relationship (from left to right) between Two, Five and Ten year US Treasuries against the landscape of a normal yield curve. Plotted in the price area of the chart are modified Bollinger Bands (set at 2.618 and a 20 period moving average) and an Ichimoku Cloud. In the indicator portion of the chart is a studied titled rSquared – a tool useful for indentifying trend.
In a normal yield curve, interest rates at the long end, represented by the Ten year US Treasuries, should be higher than those at the intermediate (Five year) and short term (Two year) maturities. The inverse relationship between bonds, represented by the US Treasury futures, and interest rates is holding true in the current market place as rates have fallen sharply during the past two year ascent in bonds.
