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2s10s Prepares To Breach Key 200bps Support, As Curve Flattening Resumes With Feeling

Tyler Durden's picture




 

The main (and lately only) bullish indicator that everyone seems to be focused on (for all the wrong reasons), continues to telegraph ongoing distressed for the financial segment: the 2s10s part of the Treasury curve has tightened to 206 bps (this was nearly 290bps a few months ago). At today's rate of flight to safety it is possible the key psychological (whatever that means - computers need therapy if Fib levels are brached?) support level 200bps will be taken out. This means all the leading indicators will soon reorient downward yet again, which also includes the ECRI LEI, which is once again due for an inflection point.

And the recently far more critical from a funding standpoint, 2s10s30s butterfly, which we have discussed extensively as the primary carry driver of stock purchasing ability, has just gone double digit again.

There is no stopping the bubble juggernaut now.

 

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Tue, 08/24/2010 - 09:45 | 539940 CashCowEquity
CashCowEquity's picture

roasting !!!

Tue, 08/24/2010 - 09:47 | 539942 spartan117
spartan117's picture

Silver going vertical.

Tue, 08/24/2010 - 09:49 | 539947 Misean
Misean's picture

Yeah what the frick is going on in PM's right now?

Tue, 08/24/2010 - 09:53 | 539962 LoneStarHog
LoneStarHog's picture

Douchinger capitulated and entered the market.

Tue, 08/24/2010 - 09:50 | 539952 firstdivision
firstdivision's picture

Eh...what was with that 5 point move at 9:48?  Did the Fed just purchase a few billion SPOOS?

Tue, 08/24/2010 - 09:52 | 539954 bugs_
bugs_'s picture

Theres no stoppin what can't be stopped.

Tue, 08/24/2010 - 09:53 | 539961 LePetomane
LePetomane's picture

"For as a lamb is brought to slaughter, so
She stands, this innocent, before the king."

- Chaucer

 

http://pix.motivatedphotos.com/2009/5/31/633794013621510430-Hyperinflati...

Tue, 08/24/2010 - 09:59 | 539976 Ethics Gradient
Ethics Gradient's picture

Get your DOW 10k helmets on.

Tue, 08/24/2010 - 09:59 | 539979 Johnny Yuma
Johnny Yuma's picture

I wouldn't be surprised if we see yields way lower before all this is through... Everytime I see the 10yr. shoot straight up, I'm thinking blow off top but it's been resilient. Just retraces and rockets up further. Bonds/notes in my opinion are a leading indicator of what's to come and it's certainly telling us something... 

Tue, 08/24/2010 - 09:59 | 539980 willien1derland
willien1derland's picture

Flashback a few days ago on Martha's Vineyard, Barack Obama is eating his Mint Chocolate Chip Ice Cream pleased with the notion of his forethought in shorting the S&P in his daughter's Scott Trade Account on Friday -

Tue, 08/24/2010 - 10:01 | 539987 Au Member
Au Member's picture

Looks like the JPM silver options expiry smashdown crew is in the shit with Dimon, someone let the PM's rise going into thursday's expiry. It'll get twatted back down in the next few hours just watch. Can't let positive vibes build for the PM's while they have to peddle the fantasy money shit.

 

 

Tue, 08/24/2010 - 10:04 | 540007 John McCloy
John McCloy's picture

People are beginning to understand that we cannot reflate out of this and all the trillions out there for the first time have no idea what location is safe for a long term deflationary bear market. So 10 years of safety with little or maybe negative return soon seems like a safe bet. Especially one backed by the mightiest military in history and shores that cannot be invaded. Housing here is a terrible investment, financials are not even solvent and global currencies are all shit because they are too exposed to political instability,war and a reliance upon and American consumer binge that continues. So the dollar becomes the only safety and metals as well. This supposed bond bubble will continue until faith in capital free markets is restored and prices find their fair value which is Many years and events away.

Tue, 08/24/2010 - 11:58 | 540440 Bam_Man
Bam_Man's picture

Agree with almost everything you said.

Any recently issued 10yr T-note held to maturity will probably lose at least 75% of its value. They are however good for one last trade. And then there's no looking back. 

Tue, 08/24/2010 - 10:43 | 540152 Miles Kendig
Miles Kendig's picture

And it will be 2-3 years at least before we see sustained + 200 again.

http://www.youtube.com/watch?v=9yhEjY1Ee3c

And congrats buzzsaw99..  you're money good today.

Tue, 08/24/2010 - 10:40 | 540155 DonS
DonS's picture

I transfered my moms assets in her 401K in Nov 09 to a medium term Pimco bond fund, the things up 4.6% in cap appreciation and about 3.5% in dividends in only 9 months. At this point I have no idea what to do with it. Thinking of liquidating, lock it in and move into money market for a little while. This bond market scares me just as much as equities.

Tue, 08/24/2010 - 10:42 | 540165 Miles Kendig
Miles Kendig's picture

PFODX

Tue, 08/24/2010 - 15:00 | 540994 Ragnar D
Ragnar D's picture

I (day)trade Treasury futures for a living, and I don't want any of my money in them.

Tue, 08/24/2010 - 11:42 | 540387 Grand Supercycle
Grand Supercycle's picture

Updated S&P500 chart showing head and shoulders with target.

http://stockmarket618.wordpress.com

Tue, 08/24/2010 - 12:01 | 540451 MrTrader
MrTrader's picture

Heck, I waited several month for this trade to earn some $$$$. Finally ! Thank you FED, thank you uncle BEN ! Your humble MrTrader

Tue, 08/24/2010 - 14:08 | 540887 Instant Karma
Instant Karma's picture

Seems like just yesterday when curve steepeners were all the rage.

Wed, 08/25/2010 - 08:20 | 542531 markettrend
markettrend's picture

2s10s Treasury yield curve is a barometer of the economy, it peaks and troughs with each business cycle. In the current cycle, it topped out at 290 level in the beginning of 2010. Since then, it trended down to the trend line and broke it decisively later on. I believe this curve will tightened more in the near future. 2 year yield is around 50bps, even with Fed on hold, the room for downside is very limited. However, 10 year yield  is at 2.50%, with the possible downward revision to GDP growth, subdued core inflation and the speed of flight to safety, it can shoot for 2.00% or even lower. This alone will flatten the curve massively. Meanwhile, when the Fed decide to hike, it will act in a very aggressive fashion, given how much liquidity it punch into the system. This will lift the front end of the curve abruptly, which is beneficial to our flattening trade...

More on http://realmarkettrend.blogspot.com/

Fri, 10/01/2010 - 06:50 | 617710 Herry12
Herry12's picture

Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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