eSignal 12 - Foward / Yield Curve Window

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eSignal 12 - Forward / Yield Curve Window

Forward / Yield Curves
Forward curves are typically used in energy, commodity and currency markets to predict future price activity based on the current shape of all the contract prices for a single future or currency pair. Yield curves are used to take a look at the macroeconomics of treasuries and their general shape.
To open this window, click on New on the main menu bar and select Forward/Yield Curve.

Analysts also often compare more than one symbol at a time and this new window type in eSignal 11.5 allows for multiple symbol overlays. To add another symbol to this chart you can click the "+" next to the symbol field at the top of the window.
If you would like to display a historical curve, you can do this by clicking one of the symbol icons below and then selecting a date from the drop down list.  Please keep in mind that the further back the chart goes the more time it will take to display the chart.

Forward Curves
Forward Curve charts provide the user with the ability to view pricing on forward contracts for commodities and can act as unbiased predictors to allow the user to better see where the market is trending.  The X-axis plots the contracts by expiration month (from oldest to newest) while the Price is displayed on the Y-Axis.  New to 11.5 is the ability to look at these curves historically. 
Yield Curves
Yield Curves are typically used to verify the "shape" of the economy…quite literally, actually. If a normal yield curve is present, long-term investors are rewarded with a higher rate of return, and short-term bonds will be a lower yield. When an inverted yield curve is present (higher yields for near-term), the market at large is in an unusual state, and a cautionary approach when investing is warranted.
There are three common shapes of a yield curve:

1. Normal: The rate of return for long-term bonds is higher than short-term bills. Typically, this is a rounded parabolic shape showing that, the longer the time to maturity, the greater the yield.

2.Inverted: This shape occurs when long-term investors are fearing that the markets are primed for a significant down turn and need to capture these perceived high interest rates while the getting is good. Because of the laws of supply and demand, this rush in snatching up long-term securities causes the price to go up. The yield, by its nature, is indirectly proportional to the bond's price, and, as a result, the yield heads lower. If the long-term yields are less than the short-term yields, an inverted curve appears.

The last time an inverted curve appeared in U.S. markets was November 2006 - March 2007, approximately six months before one of the largest down turns in the history of the U.S. markets.

3. Flat: The flat yield curve is pretty self-describing. This occurs when the short-term and long-term bond investors are approximately rewarded the same yield. This signals a period of uncertainty because the markets have not fully processed a potential change in trend.

The last time a flat yield curve occurred was just after the inverted curve took place; specifically, this occurred between April and October of 2007. Certainly, this was a period of confusion because the bond market was saying one thing while the Dow and S&P500 continued their upward climb. As many technical chartists know, divergences such as these typically indicate a significant change in market direction.

Note: This chart type is based on intraday data so you must subscribe to either real-time or delayed data for these charts to populate. After the chart populates, the data will not update unless you press the F5 key.