Jump to content
Sign in to follow this  

Bonds and Gilts

Recommended Posts

Posted (edited)


Some traders on IG Community expect there to be a drop in major equities. They also think precious metal prices may go up. If this plays out then an important asset which often traders never seem to talk about or discuss is Bonds and Gilts. You may wish to set up a new section on the IG Community called Bonds?

If things do play out (there is no guarantee that they will) but if they and major stock markets decline and precious metals do increase in value then I think Bonds should see a price increase in such conditions as institutions and 'High Net Worth Individuals' (HNW) shift part of their capital into this asset class to protect their portfolios. Bonds are a 'defensive' assets that tend to rise in value in such conditions. The smart money tends to enter Bonds before the mainstream media talk about them. The smart traders will notice the trends before traders begin trading them. 

Have a look at the price action on some of the following:

  • US Treasury Bond
  • US 10-Year T-Note
  • German Bund
  • US Ultra Treasury Bond
  • US 5-Year T-Note
  • US 2-Year T-Note
  • Japanese Government Bond

I for one am keeping a close eye on the price action for these (above). I shall let the price action confirm my assumptions. Also Bonds as an asset class tend to be a lot less volatile than other asset classes so they should not be crazy daily swings like we are seeing on major indices right now. 

The one thing most of the above have in common is that they are all trading above the 20, 50 and 100 day moving averages on a '4 hour' timeframe. 

Edited by TrendFollower

Share this post

Link to post

Whilst the underlying trade may happen, I doubt there would be sufficient number of people who trade it for it to warrant it's own section. Volumes for this asset group are VERY low. 

It may be worth putting posts like this in the Macro Events section. If there are sufficient unique threads then we can consider it. 


Share this post

Link to post

If one looks at the German Bund chart then it looks very interesting indeed.

The trend is upwards and the price action is supporting this over the past 12 months which could possibly mean there has been a shift in capital and strategy for some of the largest players in the bond market.

The price is trading above its 20, 50, 100 and 200 day moving averages.

The German Buxl is also showing encouraging price action over the past 12 months.

The UK Long Gilt has spiked up over the past month and so too has the French OAT and German Bobl. If you then compare this with the 3 month Eurodollar price action then it begins to tell a narrative of what may be starting to happen with a shift in capital towards precious metals and bonds.

Once Brexit and US-China trade talks are concluded then certain economies around the world may begin to unravel and head towards recession. If this were to happen then Bond and Gilt prices may be a key indicator in terms of how they behave and react.  


Share this post

Link to post

German Buxl up 115 points today at the time of writing. 

There were some really big and noticeable price rises today on the Bond market. 

The institutions will be shifting and allocating a proportion of capital from the super rich and wealthy investment portfolio's into Bonds. 

I think we are seeing that shift gather pace. It has been gradually happening slowly over the past 12 months but I think as Brexit and political turmoil around the world takes shape then it will be more obvious and apparent.

I would expect the Precious Metals market to move in tandem and more specifically Gold but this is an assumption and I shall wait for the price behaviour to either confirm or reject such an assumption. 

Share this post

Link to post

In my personal experience when I see yields on Bonds declining it means that Bond prices are rising. This activity over a prolonged period can sometimes be a signal of a potential recession around the corner. 

UK Bond prices will be very interesting over the coming weeks and months. If this is to play out like I think it will then the price behaviour on Bonds and Gilts can be added to my 'decision making basket' so that it can assist me along with many other indicators as to when the market may begin to decline in anticipation of a serious recession. 

Share this post

Link to post

Apparently Italian Bonds (especially long dated over short dated) over value. 

Italy's Most Beaten-Up Bonds Are Place to Be for NatWest, HSBC


I personally am interested in Germany Bonds and potentially UK and US Bonds should they teeter on a recessionary phase. Also I have more confidence in Germany, UK and US Bonds over Italian Bonds. With Brexit and turmoil in the EU another Greece is just waiting to happen. 

Share this post

Link to post

Keep a close eye on Bonds as this will be a useful indicator on expectations going forwards. 

@JamesIG, I don't know if there is a problem on IG's UK Spread Betting Platform but the US Ultra Treasury Bond was up over 120 points at an hour ago so around 6:00 pm UK time. Is this right? That would be absurd move in points!

I have to admit the platform is very 'clunky' today. It may be the trading volume with Brexit negotiations and the votes this week but the platform is shaky. 

Share this post

Link to post

If you have a look at the US Ultra Treasury Bond at the start of March and now then you will see that there has been a gradual increase. 


The UK Long Gilt is showing a similar trend.


The German Bund chart on a 4 hour view shows a very interesting narrative. 


If the big institutions want to reduce their exposure to risk assets and they think there is going to be large drawdowns on equities, re-balancing in portfolios can occur thus increasing capital allocation in Bonds and Gilts. I find looking at the price activity on Bonds and Gilts a good indicator to the risk appetite out there for the big institutions. 


Share this post

Link to post

German, UK and US Bonds in general seem to be in the blue this lunchtime. Gold and Silver are both in the red but are not far and seem to be making a slow and steady rise upwards since the large correction last week around Thursday time. 

Share this post

Link to post

UK, US and German bonds still performing well in the blue. German Buxl was up over 100 points a few minutes ago. Gold and Silver both still in the red and not showing the same strength. The US Dollar may have something to do with this but it seems risk off at the moment. Major indices down but Bonds up more than normal so far today. 

Share this post

Link to post

Bonds have started another day in the blue and this time they are being supported by both Gold and Silver. I am wondering if there is likely to be seizmic shift in capital from higher risk (equities) to lower risk (Gold and Bonds)?

If one compared the price of Gold and Bonds against equities over the same period then it may help to indicate if this could be occurring.

The Brexit uncertainty and US-China trade deal risks still remain and whilst they still do I personally think it provides a positive platform for both Bonds and Gold. Now this may not translate into the price action as markets do not always behave as per textbook theory or in line with fundamentals or news.

However it is worth keeping a close eye on Bond prices as if they begin rising significantly then this could be a strong indicator for the future.

Share this post

Link to post

A lot of investors and traders ignore what the Bond prices are doing. There comes a point in a 'economic' or 'market' cycle where allocation to Bonds can not only reduce the risk to your portfolio but also provide steady returns when other assets are declining in value. 

At the time of writing this post - The US Ultra Treasury Bond is up 150 points. This is attractive from a day trading or short term trading perspective. It also becomes interesting from an investment perspective. I have come across a lot of traders who ignore the price action on Bonds because it is not 'sexy' enough for them. I have also come across investors who decide to allocate capital to Bonds when it is too late and they are enter at the 'end of the party'. Not only do they then lose part of their capital allocated to Bonds but are the 'dancing by themselves' on the dance floor!

The German Buxl is up 360 points at the time of writing. Obviously the news that came out of Germany recently affected the DAX and one can clearly see a flight for capital into Bonds. 

So Bonds can be a very interesting market for both investors and traders during times of economic uncertainty and economic instability.

Is anyone else investing or trading in the Bonds market on the IG Community? 


Share this post

Link to post
Posted (edited)

This is the current chart for the German Bund.


The above is the 'daily' chart. Now have a look at the weekly chart below.


Now I am going to show you the monthly chart below.


Now you can begin to see from an investment perspective the capital growth available on Bonds. Bonds are traditionally and historically a defensive asset. There will be plenty of equity funds and investment trusts that outperform Bonds over the same period of time. However, we are entering times of uncertainty and therefore wise to have even a small allocation of Bonds in your investment portfolio. Now this could be anywhere as low as 1% or higher depending on your risk profile and tolerance. 

Bonds are also good to day trade on those days where there is an increase in market uncertainty, economic instability and basically an increase in panic!


Edited by TrendFollower

Share this post

Link to post

If major equity markets take a tumble then Bonds should perform strongly in this period.

It would not be unreasonable to think that over a 2 to 5 year period that Bonds outperform Equities.

Of course this may not happen but it would be wise for investors to allocate even a small percentage of their portfolio to Bonds. Some of the valuations seem very high to me, especially those in the US, and it is very unclear if those companies will be able to achieve the financial results necessary to keep such high valuations. 

Also for investors this strategy could be aligned to their risk management strategy within their investment portfolios. 

What I fear is that a lot of investors may only turn to Bonds once any major corrections in equities is firmly in place. By then the smart money has already been allocated to Bonds and the latter investors end up paying a high price for investing. They are also left till the end as the smart money will leave before them meaning they are likely to make a loss.

There will be some that may not agree with my sentiment but for those (they could be right and I could be wrong) I suggest just keeping an eye on the price action of Bonds. See what Bonds have been doing in terms of price behaviour over the last couple of years, what they are doing now and what they are likely to do going forwards. 

Share this post

Link to post

This article from the Financial Times is rather relevant to this specific thread.

Global investors make record shift into bonds


The increase in capital being allocated to Bonds has led to the price action that we have already seen. Those in early will have benefited. The point I was alluding to in the previous post is that those who enter later will not necessarily obtain the gains that those in the past have received.

Share this post

Link to post

IG have posted this today on the main screen under News and Analysis:

Trader's thoughts - The world economy’s health is looking worse than previously imagined

A return to a negative-yield world

The consequences of the bad PMI numbers were immediate and explicit. The yield on 10 Year German Bunds raced to its ignominious and long-awaited milestone, cracking into negative yield for the first time since mid-2016. If there is any evidence necessary that the global economy is at the end of a cycle, it’s that ****-bit of information. The rush into government bonds on Friday was ubiquitous, however, and has created some worrying price action. Conspicuously, the rush into US Treasuries has put the yield US 10 Year Treasuries to just above the current US OCR at 2.40%. Furthermore, Japanese Bond Yields have travelled further into negative territory itself, with the 10 Year JGB yielding -0.08%.


Rate cuts being priced-in across the globe

The falling yield environment is, of course, being driven by a pricing-in interest rate cuts in developed economies the world-over. Though directly caught in the fray on this occasion, as far as the disappointing data goes, the materialising prospecting of weak global demand has seen traders boost their bets on a US rate cut in the next 12 months. The implied probability of a cut from the US Federal Reserve by January next year leapt to almost 80%. The price action has led to a disturbing event in rates markets: the spread between 3 Year and 10 Year Treasuries has fallen to 0 basis points, inverting the yield curve between those two maturities.

Share this post

Link to post

There is a lot of talk about the yield curves and inverted yield curves on other threads and IG themselves have released material on this very matter. Below is an article which will explain it nicely. 

The US bond yield curve has inverted. Here's what it means


For some of you who are not familiar with Bonds, below will help to explain Bond Yield and Returns.

Bond Yield and Return


Share this post

Link to post

There is a possibility that the Bond markets are overreacting. There is also a small chance that speculative capital has arrived more recently too. One must remember that Bond prices have not just reacted upwards overnight and they have been creeping up gradually and for a while.

The media always reports once they have noticed the pattern / trend but not necessarily when traders have idenfitied the pattern / trend. 

However, just think if there was a recession in the US then what would the US Government do? Lowering interest rates would be one of the tools available to them. This notion is now being talked about and may be causing the price behaviour within the Bond markets.

Share this post

Link to post

I see @JohnDFX from IG has posted a blog entry in Market News today which is relevant to this thread.

Post-Fed; yield curve inversion; another reset in the Brexit timeline - DailyFX Key Themes


  • Like 1

Share this post

Link to post

From an economics perspective, when bond yields decline, the bond prices will rise and vice versa.

In my experience, when there is economic uncertainty, political instability and risk increasing then capital will shift into bonds. This will in my opinion lead to higher bond prices and bond yields declining. This is what the bond market has been experiencing and what we have all been witnessing. 

The article below is trying to alert its readers.

One by One, Global Bond Markets Are Flashing the Same Warning



Share this post

Link to post

Apart from the Italian BTP and Italian BTS all Bonds available on IG's platform are in positive (blue) territory.

Share this post

Link to post

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Member Statistics

    • Total Topics
    • Total Posts
    • Total Members
    Newest Member
    Joined 22/04/19 07:34
  • Posts

    • @Bala198,  Kodiac is right, for it to appear in the top left corner it also needs to be activated by right-clicking on the chart and then click 'one click trading' but the option will only appear in the list if the market is open.  There is a better one called mini terminal in the IG mt4 app package download on which you can add stop loss, trailing stop and take profit all on the same bracket order. Once downloaded it is placed in the EA list section of navigator. 
    • AND 777 IS THE NUMBER OF ...  companies reporting earnings this coming week and some very big tech names amongst them. This is significant as the US indices are waiting at the boundary for either a push forward or a pull down and big tech have been the main drivers for some time now. Bear in mind also the US market opens tomorrow and that the following week also has a large number corporate earnings releases. See the calendar below.
    • Just 19 hours later from my previous post and Bitcoin is holding firm but the rest of the 'Alt Coins' are dropping in price considerably. Bitcoin mat well follow suit. Time and price action will tell us whether this happens or not. The rest of today and tomorrow should be very interesting. 
    • Looking at Lumber then it seems to me that it needs to hold the $30000 level. If it can defend and hold that then there could be further upside this year. If not then it could begin going down into the late $20000's. This is a personal assumption which now will need to be tested based on current price behaviour.  In my opinion, for any trend followers who are short, they must hold (even if they do not add to their positions on further price declines) until there is a clear trend reversal. This should execute their stop loss / trailing stop. In my opinion, for any trend followers who are waiting on the sidelines that do not want to short, then they must wait patiently until there is a clear trend reversal signalling / indicating a trend reversal to warrant a long trade initiation. 
    • One thing to remember is that Platinum is trading at a cheaper price than Gold. Gold and Silver have left Platinum behind since the rally started back in August of last year. It seems Platinum has had enough and wants to begin to assert some authority on the price action.  Platinum of course has several important industrial uses. I think Platinum will try and hit the $1000 dollar area as that is an important psychological price point and these rallies love nice round numbers as a target. This is seen time and time again in Commodities. Platinum is both an industrial metal and a precious metal.  Platinum is also known at the 'Rich Man's Gold'. This could lead to a reversal in pricing between Platinum and Gold. Platinum should be more expensive than Gold and so there could be a shift in speculative capital from Gold into Platinum. Platinum could attract extra volatility as Gold and Silver are more liquid markets.  I do not know what will happen in the future for Platinum prices but I shall follow the price action closely. Platinum will not follow any of my thoughts or assumptions as to what I think may happen. Platinum is not obliged to follow any of my trading strategies or plans. Platinum may not follow the path I have mapped out in my mind and nor does it have to. Platinum will do what it will do just like any other Commodity. As a trader the key is whether I can profit from the price action or not. Prices can change like the weather and so can traders views and opinions. I know from my experience that on many occasions the price action changes my views and opinions. There is absolutely nothing wrong with that. If this did not happen due to stubbornness, ego or I know best attitude then it would be worth worrying about. 
  • Our picks

    • Could the price of pork increase by 78% in China by 2020? - EMEA Brief 18 Apr
      The African swine fever disease has reached Southeast Asia and parts of Europe, including the world’s biggest producer of Pork, China. A prediction from the Japanese bank Nomura, is that this could cause prices to rise by 78% in China by 2020, to 33 yuan per kilogram from 18.5 yuan

      Global PMIs come into focus today, with eurozone and US figures released in the wake of a poorer Japanese number this morning. Pinterest has priced its IPO at $19 per share, above the previously indicated range but still lower than in private funding rounds two years ago.
      • 1 reply