The Yield Curve

This is a spread trade that attempts to capture the changing interest rate environment.
It appears from Tuesday’s Janet Yellen’s testimony the Fed will raise longer term rates later than sooner.
At the same time she mentioned that the shorter term rates (such as Fed Fund rates) will be increased before the longer term rates.

When rates go higher interest rate instruments move lower. This spread trade will hopefully capture the “timing” of those increases.
If the scenario materializes the longer term 30 year bond should maintain their current rates within a certain range and keep prices at higher levels.
At the same time the shorter term rates should rise causing the price of those instruments to drop.

It sounds somewhat complicated but the bottom line is that the difference between the 30 year Bond (currently around 145-15) and the 5 year Note (currently around 120-00) could continue to widen.

See chart below (indicators included).

For additional information and risk parameters please contact Mitch LaRocca @ 972-387-0080 or mitch@dallascommodity.com

Mitchel J. LaRocca Jr.
Dallas Commodity Company, Inc.
15305 North Dallas Parkway, Suite 930
Addison, Texas 75001
Voice: (972) 387-0080
Fax: (972) 387-0018
mitch@dallascommodity.com
Guaranteed Introducing Broker to R.J. O’Brien & Associates, Inc.
The risk of loss in trading futures and options can be substantial, therefore only genuine “risk” funds should be used in such trading. Futures and options may not be a suitable investment for all individuals and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position.

This material has been prepared by a sales or trading employee or agent of Dallas Commodity Company, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Dallas Commodity Company’s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

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