The two-day FOMC meeting concluded on Thursday with the announcement that the Fed had cut the Federal Funds rate by 50 basis points to 3.0%. However, the yield on 10-Year U.S. Treasury notes rose to 3.73%, a gain of more than 8% over the last five trading days. According to the MIM, when the yield of 10-Year notes has risen like this leading up to a FOMC rate cut, CBOT 10-Year U.S. Treasury Notes futures (TY), which closed at 116-00 yesterday, typically close up five weeks later.
Q: What happens to 10-year T-note futures when the yield on 10-year U.S. Treasury notes rise by more than 1.5% in the five days leading up to and including a FOMC rate cut?
A: According to the eight previous occurrences of this event, EventEdge indicates that CBT.TY has shown a strong bullish edge that peaks 25 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the most recent occurrence of the event (Wednesday, Jan. 30, 2008) is Thursday, March 6, 2008. CBT.TY rallies in 100% of the cases (8 of 8) by an average of 1.7% relative to the close on the event date. The overall return of the eight cases is 1.7%, which, based on the close of CBT.TY on the event date (116-00), provides a target price of 117-31.
If you would like to see more details of this historical edge, go to www.markethistory.com
Scott Murani covers European energy and commodity markets from London.
