treasury auction tail regime
What it checks
When demand at Treasury auctions weakens (low bid-to-cover, foreign buyers retreating), equities sell off over 1-3 weeks. We use the auction signal as a regime gate on each ticker.
Mechanism
Treasury auction bid-to-cover and indirect-bidder share are dealer-stress / foreign-demand proxies. When demand collapses (weak BTC, indirect drying up), equities follow into risk-off over 5-15 days. The opposite signals risk-on.
Signal rule
30d composite z of average BTC + indirect-bidder % across Note+Bond auctions; |z|>1 + own-name trend gates 5/10/21d positions.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
treasury_auction_resultsWorker data table, see services/worker schema.
Expected edge
- Paper alpha
- 3-4 bps per cycle (Lou-Yan-Zhang)
- Paper Sharpe
- ~0.4-0.6
- Paper window
- 1999-2010 (Lou-Yan-Zhang)
Auction-cycle yield effect 3-4 bps per cycle (Lou-Yan-Zhang); equity Sharpe 0.4-0.6 on risk-on/off macro beta.
Related families
credit spread shockMacroGilchrist-Zakrajsek 2012 AER show the excess-bond-premium component of credit spreads predicts equity returns at 1-3mo horizons with Rยฒ up to 12%. We use raw BAA-10Y (Moody's BAA corp minus 10Y Treasury) from FRED as the cheap proxy. Widening shock = risk-off pressure (short high-beta names with downtrend); sharp compression = risk-on regime (long beta names with uptrend).
macro regimeMacroBeyond regime_overlay (#10) which uses VIX + SPY trend, this family keys off the macro regime detected from FRED data: term-spread inversion (10Yโ2Y < 0), credit-spread widening or compression (BAAโ10Y z), and Fed funds cycle direction. Single-name version: gate the simple long-trend signal (SMA50 > SMA200) on the FRED macro regime โ full long only in risk-on, half-size in neutral, flat in risk-off, short in inversion.
consumer sentiment sector rotationMacro / SentimentUMCSENT (Univ. of Michigan consumer sentiment) is a sufficient statistic for retail risk appetite. Sentiment z-score above +1 forecasts small-cap and consumer-discretionary outperformance over 1-3 months; below -1 forecasts defensives bid. 12m rolling z + own-name trend gates the per-ticker overlay.
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