Treasury Auction Tail Regime
In plain terms
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.
How it works
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.
Live results
16 times picked on its own · 84 times inside a blend (71 beat the stock) · updated 2026-06-06Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- Treasury auction results
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
- Reported return
- 3-4 bps per cycle (Lou-Yan-Zhang)
- Reported Sharpe
- ~0.4-0.6
- Tested over
- 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
Watch the corporate-bond credit spread — when it compresses sharply, high-beta names rip; when it widens sharply, they get hammered. We trade the regime change.
Uses Fed-funds, term spread, and credit spread (FRED data) to flag risk-off vs risk-on regimes and scale exposure accordingly.
The cited research finds the opposite of a momentum story: when consumer sentiment is unusually high (after stripping out the economy's fundamentals), small-cap stocks tend to do WORSE afterward. Our earlier version traded raw sentiment in the same direction as the trend, which does not match the research, so it was retired in June 2026.
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