Short term
Trade view / 29 October 2015 at 11:05 GMT

The 2 year treasury contract moves to interesting levels

Chief Investment Officer / ACIES Asset Management
Switzerland
Instrument: ZTZ5
Price target:
Market price:
Background
Yesterday's dip in the US 2 year treasury looks quite similar to what happened back in September. We bought it back then and the same logic is likely to work this time around. The US treasuries are in a positive trend and dips like these are likely to bounce right back up again.

The long term picture is quite telling. We had a strong rally phase up until late 2011. From there we had a sideways phase, with a positive tilt for a couple of years, and since late 2013 we've been heading up strongly again. 

Weekly US 2 year treasury continuation
US2 Weekly

Source: CSI Data

On the weekly scale, you can barely see the recent dip. Odds are that in a few weeks, no one will even remember it. 

On the daily scale below, you can see the near term dip. You also see the past four trades made in this market on the same systematic model. So far, they've worked quite well.

Daily US 2 year treasury futures continuation
US2

Source: CSI Data

Management and risk description
Buy on current levels in the December contract of the US 2Y. Set a fixed stop and target in the market from the start, for a known risk and potential reward. The dashboard below shows that the price trend is strong and the volatility stable. 

US 2 year treasury
US2 Dash

Source: FollowingTheTrend.com

Note that this market is traded and quoted in fractions of 32.

Parameters

Entry: Enter long on current levels, around 109'13, i.e. 109.4063.

Stop: Hard stop at 109'06. 

Target: Take profits at 109'26. 

Time horizon: Average holding period of this trading model is about two weeks.

December 2015 US 2 year treasury futures contract
tuz5

Source: ThomsonReuters


— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more

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