A turbo call to play the fall in US rates

The slowdown in the resumption of US growth will lead the Federal Reserve to continue to pursue a pro-active monetary policy likely to further lower the remuneration of ten-year government bonds. The movement can be played with leverage by means of a turbo call.

Rising to around 0.8%, US ten-year interest rates are picking up on the prospect of a deal ahead of the November 3 presidential election on a new stimulus package between Republicans and Democrats. It is time for the resumption of growth to show signs of slowing down and the number of weekly jobless claims to rise again. However, the health crisis is far from being eradicated even if two laboratories, Pfizer and Moderna, are hopeful of submitting by the end of November an application for express authorization for the marketing of a vaccine against covid and the Reserve. The American federal government stands ready to further strengthen its monetary arsenal to support the economy and prevent the epidemic from degenerating into a financial and stock market crisis at all costs. Faced with the vertiginous swelling of the American debt, international investors are less and less fond of the famous treasury bills and it is the central bank which has replaced itself by financing the deficit of the world’s largest power. The situation should last unless it creates a financial shock and the remuneration of government loans is therefore expected to remain low and close to zero for the long term (excluding inflation). It was Jerome Powell, chairman of the Fed, who announced it.

5.8 times leverage

To bet on the ebb in US ten-year rates, it is possible to take a turbo call issued by Societe Generale without maturity and with a safety threshold located at 115.10 dollars below which the prices of the futures contract on the loans of state must not fall back. Otherwise, the turbo immediately loses all of its value. However, the large gap between the current contract price of $ 138.76 and the turbo safety threshold limits risk and provides time to unwind the position. Meanwhile, the certificate has an attractive leverage of 5.8 times. Thus, assuming an increase in the price of the ten-year government loan contract (reflecting a drop in rates) to $ 150, for example, the call will appreciate by 47.5%. But be careful because, conversely, if the contract falls to $ 126, the turbo will lose 53.9% of its value.

Our advice: buy a turbo call on American ten-year government bonds (code: DE000CJ814E4) issued by Société Générale; unlimited maturity; funding level and security threshold: $ 115.1032; price: 20.10 euros; portion: 1.


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