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10 Reasons For Today's Pounding In Bonds
Just as yesterday we shared the top 10 groputhink reasons for the rip in 10 years from 3.84% to 3.75%, so today we provide 10 possible justifications for the round trip back to 3.83%. Most likely, none of this is true or relevant, but we have to fill posts with content, even if it is complete bullshit.
Market News' 10 reasons for the bond roundtrip.
1) There was mortgage selling and mortgage origination selling that weighed on Treasuries;
2) Treasury 10-year futures fell below and key support level and that weighed on prices;
3) There was speculation that turned out to be unfounded that the Fed might actually sell some MBS at some point and that just added fuel to the fire as prices were headed lower;
4) Yesterday the market was talking about duration buying as yields fell but that talk evaporated as yields rose;
5) The ADP private payroll report printed at -84,000 which was slightly weaker than expected but sources said it was not bad enough to dash hopes that this Friday's job report would show a growth in payrolls after months and months of losses;
6) Heavy corporate bond issuance of $30 billion on Tuesday was being snapped up indicating investors preference for risk and higher yielding securities;
7) The credit defaults (CDS) market continues to rally and one salesman called it a "grab-a-thon." Spreads fell below 80, a new high for this series, after being at around 97 in early December;
8) New supply will hit the market next week and Treasury will announced tomorrow how many 3s, 10s and 30s it will sell;
9) There was talk of asset allocation out of Treasurys into stocks on Wednesday;
10) Finally, the non-manufacturing ISM report was not as strong as some expected but it was not weak either. It came in at 50.7 vs. 48.7 in November.
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Would it kill them to say this market is schizo and leave it at that? But like you said, content needs to be filled.
so should i buy, sell or hold?
Yes
3 o'clock.
11) Nobody in his right mind would lend the USG money until 2040 for 4.6%.
"lend the USG money until 2040"
Hell no! I'm minimizing my withholding so that they will have as little of my money as possible. I have never owed tax before, always got a refund but screw that. I don't want to accidentally loan them money in any shape or form.
DO NOT GIVE AN ADDICT DRUGS.
Don't be an enabler.
Starve the beast.
Especially if they threaten you.
A few years back I realized they make interest off your withholdings before tax day; and they demand more if you pay late. It's almost a protection racket. Wait.
starve the beast! starve the beast! When I'm assed out the government does nothing for me. After taking 40% of my loot for years. Fuck the government.
Watch TBT. Could easily rise 50% in next three months.
12) China does not want anymore long T-bonds.
They know the USD is screwed long-term, because the FED will print infinite FRN$ to close the real-estate deflation gap.
Long bonds pay you back in FRN$, which will depreciate a lot more than the measly 4.6% yield rate can offset.
And a lot of other countries are shunning our long bonds too.
Soon the FED will be the buyer of last resort of long T-bonds, because the FED will be the ONLY buyer.
Truont, I agree completely. For the bond challenged, is there any reason the fed can't buy long bonds and keep mortgage rates low? Is gold/commodites teh way to protect your assets, in your opinion? Thanks for any response.
Yes, the FED will definitely buy long bonds to keep mtg rates low. They will buy mortgage products to keep mtg rates low too. They will buy buy buy. But they won't buy enough to push the yields below where they are now. They just want to keep them at this level for as long as possible. But the cost of this monetary magic is that the FRN will tank. This is "quantitative easing" = money printing = Wiemar Republic = currency crisis.
If Helicopter Benny were not insane, then I would buy long-bonds too. Because deflation would wreck our economy today like it did during the Great Depression in the 1930s
I think gold/commodities is the way to go now, though.
Why? Because Helicopter Benny has already told the world that he will do ANYTHING to prevent deflation, even drop FRN$ from helicopters on the cash-starved public. I take the man at his word.
You see, in a Long-Wave Winter like we are going into, you are going to have a bust. First we had a boom (1990s), then we have a bust (2000---???). Ben can take the bust in two ways:
1) Deflationary bust where unemployment is massive, and the economy stops, housing collapses, and general prices go down.
2) or a Hyperinflationary bust where unemployment is not as bad, housing prices are stabilized, and the economy charges along because everyone is spending every FRN they earn, because prices are shooting up!
Based on all of Benny's statements, research, and past actions, I believe Ben has chosen door #2.
I don't doubt, that a big bank like BoA will fold or a sovereign nation will default, and that will tank gold/commodities in the SHORT term. However, Ben will swoop in to save the day, dropping FRN$ from his helicopter, and then gold/commodities will turn right back up again. But I am not brave enough to try and time this madness--so I have decided to buy/hold commodities and wait and watch.
Good luck. One way or the other, we are all screwed. My bet is the fed will not be successful in maintainig inflation. But, I fully appreciate that the fed will do everthing in its power and everthing not in its power to prevent deflation. This includes changing the rules in the middle of the game - closing the markets, closing the banks, prohibiting liquidation and withdrawals. If there is a major liquidation panic, the government will take over the markets, which would essentially be the same as closing the markets.
so why not hold what the Fed will buy? look at MBS, P.I.M.P.co made a killing selling that sh*t back to them at par or whatever.
Cuz the price will never get above where it is now (ie the long bond yield will never get any lower). All the FED will do is try to keep it this low, but never enough for you to be compensated for the depreiciation of the FRN.
Truont, thanks.
Because, big bear up there, you are not big enough to be bailed out.
Bullshit.
The US Public is/will become a HUGE buyer of Treasuries.
Indefinite ZIRP means perpetual yields of 0.05% on Money Market Mutual Funds and 0.25% or less on FDIC insured bank accounts.
Virtually ALL that money will slowy but surely find its way into Treasuries.
In the end, the US Public will become the "final bagholder", but this game has several innings left in it.
Bam, I agree with you if you are talking SHORT-term Treasuries. I am talking LONG-term treasuries. Treasuries have different durations. I agree that money market fund depositors are being herded from money market funds into short -term treasuries. but this has little to do with Long-term rates that you see in mortgatges.
Bam,agreed on all. But there are cash alternatives to being
a slave to Treasuries and getting nothing to store it,
while enabling the Govt to steal or freeze your money
in the event of a currency crisis. Sort of have to get
your mind into new thinking: "the return OF your money,
not the return ON your money." Will Rogers...?
Short Term: 0-1 year.
Keep cash on hand for at least 3 months of expenses.Sorry,
until gold becomes easily redeemed into FRN fiat currency
you must hold some cash. Remember, gold still taxed: 28%
Short to Intermediate Term: 1-5 years.
Transfer rest of cash to stable currency countries.
Only two left really. Canada (CAD) & Swiss (CHF). Or,
see below if you believe that even this is not safe.
Longer Term: 5-10 years.
Physical gold, oil and commodities (soft).
You should position yourself for: dollar collapse, a forced
currency devaluation, a currency reset and a 50-75% collectibles tax on all PM's to force gold/PM holders
out of "hoarding" into dollars like Roosevelt did in
1933 when holding of gold became illegal.
These only work as long as we do not have total chaos.
If we come to that point well: gold, guns, gardens, land and a lot of like-minded self sufficient friends are going
to be fairly important.
I will Bullshit 12) for another reason.
China CANNOT stop buying T's and maintain the currency peg at the same time. If the CNY was allowed to appreciate, it's China that will suffer, not the US.....but then again the US will not allow this due to the corporate power lobby. Corporate American is too heavily invested in China to allow for China exports to diminish which is why the Chinese will be forced to consume their own junk before any new direction in currency exchange or US bonds arises. This is what I refer to as the 21st Century Opium War.
Right--that is why China is buying SHORT-term Treasuries on the front of the yield curve. They have all but stopped buying the long end and are only buying the short end. This is the whole problem we are seeing today in the OP. Long-bond treasuries are being shunned, while short-term treasuries are being gobbled up.
Well isn't that a sweet deal for the US and China. Short end with near 0% return whilst maintaining the peg.
Why? So they can depreciate their currency so that they can lend us the money and we can still afford to buy their crap??? How is that good for the Chinese?
If it were me I'd rather keep the shit I worked for than slave all day to give a guy money so that he could buy my shit at a discount.
You also have to remember that statement from one of the China bank heads about a month ago that because Americans are spending less money on crap from Wal-Mart and Home Depot the trade surplus was going down. Leaving China with less dollars to buy our lousy Treasuries at any duration.
Take this for what its worth from a Chi-com banker. I'm sure they can scrape together dollars to buy copper, oil, gold or wheat. Maybe its another signal that their tired of Ben and Bam doing sex to them like there Mrs Obama!
RF-no schmeising there
What do the banks have these things marked at, again?????
http://www.structuredfinancenews.com/news/-201575-1.html?ET=structuredfi...
"GMAC Financial Services has written down the value of the riskiest mortgage assets of its mortgage division by 41%, a move that could be a precursor to a sale of the unit."
http://www.structuredfinancenews.com/news/-201574-1.html?ET=structuredfi...
"A Standard & Poor's review of 15 U.S. subprime transactions issued between 1998 and 2004 has ended with lower ratings on 48 classes from 14 transactions."
"Bonds" means corporate bonds....
The word you are looking for is "govvies"
10) Finally, the non-manufacturing ISM report was not as strong as some expected but it was not weak either. It came in at 50.7 vs. 48.7 in November.
correction the non mfg ISM came in for December 2009 at a robust 50.1
In November it was 48.7
In October it was 50.6
In September it was 50.9
In August it was 48.4
(looks like a trend to me)
http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943
if you dig into it a bit there are some interesting dynamics
(keep in mind these are month to month comparisons
Imports +6.5%
Inventories +6.%
New Export Orders -8.5%
13. Capital flees a doomed currency and all paper assets that are denominated in that doomed currency.
14. Capital flees corruption.
Is anyone else considering agriculture stocks such as agrium to be a viable investment?
http://pragcap.com/the-ultimate-guide-to-2010-investment-predictions-and...
Bill Gross says that he's not worried about the FED's expanded balance sheet although the market "may be"
http://www.time.com/time/business/article/0,8599,1951623,00.html
UMMMMMMMMMM..... REALLY Bill!? Could that have anything to do with the fact that they've bought tens of billions of your crap, and lifted the price of your crap sky high, ALLOWING YOU TO PROFIT DESPITE YOUR SHITTY INVESTMENT JUDGMENT...
This guy is really a GENIUS! We should all take note of his opinions, since he is such a SUCCESS - isn't that the only real measure in life?
unfortunately in America the answer seems to be yes. Look at all the MBAs who can barely add but yet have 6 digit bank accounts after 3 years of work.
What about the simple fact that most of us see price inflation in commodities, precious metals, energy, food, etc., on the horizon and don't want to be stuck in a fixed-income vehicle or low-yield bonds?
Bob's Your Uncle!
666. American unwillingness to pay their own debt, easier to go begging to the Chinese. After all, bankruptcy is the American way.
Well boyz, I don't see any great safety in the front
end of the yield curve. Seems to me that if Ben is
so brilliant, the trade is to sell the front end
and buy the back end. Opinions?
"Most likely, none of this is true or relevant, but we have to fill posts with content, even if it is complete bullshit."
Marla, you're gonna be hearing from the NYT's lawyers. This is now their official motto." I believe they had it trademarked.
13. Too much sugar in the bond traders' goodies two days ago. Corrected yesterday.
13a...
When money, currently in foreign markets looking for better returns, comes flowing back into safer markets and puts pressure on yields, that will be the tipping point.
That's when it will be game over for long treasuries.
Flouride in the water supply.
Thanks Bill. You make shitty investments, show the world what kind of an idiot you are, get bailed out by "us", then put pen to paper calling the system broken? What up?
You cannot cover your tracks. White collar crime is now more pervasive than ever, because legal lines have been lifted by Obama in the name of saving the economy. Ya.... I've got no job, but Hussein saved me. THanks. Bill drives a Jag.... I drive a broken Pinto. Who's been saved again?
I know a few people like pimpy. Take the "higher ground" only after they've benefited from willingly engaging in a corrupt relationship. Personality traits are truly sociopathic.
Enjoyed reading the piece. Needed more toilet paper anyway.