Among the less common financial securities that you will find to spread bet on, you should consider the US 10 year note. Its price generally moves in an inverse relationship to the long-term interest rate.

Lets consider first a long bet on the “US 10 Year T–Note Decimalised”, as it is known on the IG Index website. A long or buy bet means that you think the interest rate on this financial product will be going down, increasing the value of existing notes. The current quote is 12,998.8 – 13,002.8. You decide to stake £6 per point.

Say the price rises up to 13,352.1 – 13,356.1, and you decide to take your winnings. As this is a standard long or buy bet, the bet opened at the higher or buying price, and closes at the lower or selling price. So to see how many points you gained, you take 13,002.8 away from 13,352.1, which gives you 349.3 points. Your bet was for £6 per point, so this multiplies out to give you £2095.80 as your total profit.

If you have worked it out wrong, and the price goes down instead of up, then you may have to work out how much you have lost. For example, you may close your bet when the price goes down to 12,962.3 – 12,966.3. In this case, the number of points you lost is 13,002.8 less 12,962.3, which is 40.5 points. Your stake remains the same, which means you lost £243.

As a second example, lets look at selling the US 10 Year T-Note Decimalised”. Once again, selling means you think that the price will go down, and for the T-Note this happens if the interest rates go up. Place a short bet for £12 per point, based on the original quote of 12,998.8 – 13,002.8. When the price drops to 12,843.6 – 12,847.6, you close your bet for a profit.

With a sell bet, the initial price is the lower one, that is 12,998.8, and the closing price is the higher, which is 12,847.6. The number of points you have gained is one minus the other, which works out to 151.2 points. With a stake of £12 per point, that means you have won £1814.40.

Taking the other case, if the interest rates fell further then the price for the Treasury Note would increase. This would give you a loss on your short bet. Say the quote went up to 13,052.6 – 13,056.6, and you closed your bet to cut your losses. You always have to be prepared to take your losses before they become too large. You may not find it easy closing your bet for a loss, but if you wait and the loss gets larger, it will be even harder to do.

Your bet opened at 12,998.8, and this time it closed at 13,056.6. The difference in points is 13,056.6 less 12,998.8, which is 57.8 points. You decided to stake £12 per point, and multiplying it out you find that you have lost £693.60.

You might notice that the quotes on the spreadbets for USA t-Notes may be different to the ones on your brokerage account. This is because the spreadbets are priced basis of futures. To avoid confusion look at the last price of the future and then compare this to the last price of the spreadbet future and note the difference and then use this as a point of reference.

Inflation remains in line with the Federal Reserve’s 2% target, but the recent jobs growth data could fuel further inflation. If inflation starts to rise, US authorities may be tempted to raise interest rates, which may put long-term government bond prices under pressure. Investors will also need to be aware of any tightening of monetary policy by the US authorities. The quantitative easing programme has in the past supported stock market prices since the Federal Reserve began buying Treasuries and state-issued mortgage-backed securities. However, any tightening of monetary policy may lead to dip in stock markets, not just in the US but also globally.

How to Spread Bet the US 10 Year Note

The US 10-Year Treasury Note, or US 10-year T-Note as it is sometimes known, is the US version of the British Gilt or government bond. It is how the US government raises money, by selling its debt for a period of time. At the end of the period, the face value or capital of the bond is repaid, and in the interim the government pays interest twice a year at a fixed rate.

The US uses some different terms for its bonds. Treasury Notes are debt obligations with initial terms from one year to 10 years. Treasury Bonds refer to debt that is more than 10 years to maturity, often 30 years. Treasury Bills or “T-Bill” is the name for debt that is short-term, less than a year. If you look at the interest rates offered, you will generally find that the government will pay at a higher rate for the longer-term bonds, which makes sense as it requires commitment by the investor for a longer period of time.

The investor is guaranteed, with the full faith and credit of the US government that the capital will be returned when the T-Note reaches maturity, and in the meantime interest is paid twice a year. The current rate on 10 year notes is about 2%, on 30 year bonds is about 3%, and on short-term debt is a fractional percentage.

As your money is returned when the note matures, you may be wondering why the price of the US 10 Year Note can vary enough to be traded on. The simple reason is that interest rates change over the years, and as they change the bonds become more or less interesting for an investor to buy. If you have a 2% bond now, but next year the bonds offer only 1%, then even with the same face value you can see that the bond you have now will be worth more, and investors will pay more than the face value.

It is possible to do some calculations to figure out just how much different interest rate bonds are worth, given the time to maturity, and the market is fairly consistent on working this out. For trading purposes, the most important thing to bear in mind is that the price of the US 10 Year Note will generally go up when the interest rates offered go down, and the Treasury Note will be worth less if the interest rates for new issues go up.

So spread trading on the US 10 year note is the equivalent of betting on the inverse of interest rate changes, in effect. The second most important fact about this financial instrument is that the interest rate referred to is not the same as the current bank rate, but refers to the interest rate for the equivalent security. As pointed out above, with a fractional yield on bank lending rates, 10 Year Notes are still paying about 2%.

With that as background, you are still able to apply the general principles of technical analysis to the charts of values, and this will help you decide which way the sympathy of the market is tending.

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