Euro Bund/T-note Spread: Trade Signal Triggered

Euro Bund/T-note Spread

I’m more than a week late getting this out, but the December Euro bund/T-note spread triggered a bearish trend change signal on Friday, October 10th when it made the first end-of-week close below the rising weekly 15-bar Moving Average since mid-October of last year.

A hypothetical trade for the blog was triggered to sell one December Euro bund contract and simultaneously buy one December T-note contract at 23.85 (premium bund). Initially, the exit strategy is to liquidate the spread on a two-consecutive day close above 25.16 (premium bund).

Euro Bund T-note Spread Weekly

Euro Bund T-note Spread Weekly

In the past, major reversals in the Euro bund/T-note spread have been followed by a new trend that lasts a year or two. Sometimes even longer. If this really is the big trend change, traders should have plenty of time and opportunity to increase the position size if the spread continues to move south. We will keep you updated as the situation plays out.

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