The IMC blog initiated short positions in the US yield curve at the beginning of March. Thanks to the weaker-than-expected jobs report last week, one of the liquidation parameters were elected.
A short September T-bond/T-note spread was entered at the equivalent 31-14 on March 1st and liquidated at 35-20 on June 3rd. This resulted in a loss of -$4,187.50 per spread.
Also, a short September T-note/5-Year note spread was entered at the equivalent 9-12.5 on March 1st. The exit criterion is to bail on a two-consecutive day close above 10-06. This hasn’t happened yet, but it’s gotten awfully close. The spread hit 10-05 just last week!
Despite the fact that the T-bond/T-note spread was liquidated, it remains on our radar screen for another potential short sale. The September spread posted a new contract high and is now just a tick away from the 36-00 mark. This puts it right on the doorstep of the 2015 top at 36-14 and the February 2016 peak at 36-10.
However, the nearest-futures spread hit a new high of 37-12 today. This is a bullish event for the spread. Because of this potential breakout, we’re going to hang back a bit and see if the breakout is sustainable or not before we post any reentry parameters. A two-day close back under the February high of 35-11 in the September spread could do the trick. If something interesting develops, we’ll certainly have more to say.