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2s10s Steepens Into And Post Auction

Tyler Durden's picture




 

Can someone please stop the endless cha-ching noises coming out of Julian Robertson's offices already? What's that? Ok, so...apparently absent some sodomy involving bond vigilantes and the inhabitants of the Marriner S. Eccles buildling, nothing can be done.

Carry on.

 

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Tue, 11/10/2009 - 16:03 | 126201 Unscarred
Unscarred's picture

Just wait 'til that 30-year auction goes off tomorrow...

Tue, 11/10/2009 - 20:07 | 126578 johngaltfla
johngaltfla's picture

"Off" is the key phrase. I do not see any foreign demand for debt with that long of a duration. They know we are screwed in less than 5 years, basic math tells any idiot that.

Wed, 11/11/2009 - 17:53 | 127582 Unscarred
Unscarred's picture

That's the reason the Treasury has issued so many near-dated securities in the past 8 months - it's the only thing that sells!

Just wait when this massive debt load needs to get rolled over, and interest rates aren't NEARLY as friendly as they are right now.  If we think we have budget deficit problems now...

Tue, 11/10/2009 - 16:08 | 126211 Anonymous
Anonymous's picture

OK - Time to take some fiatcos and move them back in
to equities. Today, the spotlight was on the dollar
moving up, treasuries down until right after the
auction. Now the DXY is sinking and markets back up.
Talk about blatant manipulation!

Tue, 11/10/2009 - 16:09 | 126213 Steak
Steak's picture

My bloomie tells me that 2s and 10s have been at this level thrice in the past (90 recession, 00 recession).  What we have forming might be the fabled triple top and quite a historic one at that.

The 2 yr around 80 bps aint going any lower on yield unless we going full blown deflation.  Meanwhile if the 2yr holds at its levels and the 10 yr sells off, we're gonna have an all time steep yield curve.

If we do end up going there, they should hand out hats on the NYSE floor of Bernanke blowing Blankfein.

Tue, 11/10/2009 - 16:36 | 126275 zarrmax
zarrmax's picture

Take a look at the Historical Spread Analysis of the 10-2cms. bloomberg users type >HSA then take a look at the HS graph with a 2001-2009 time frame. I wish I could post it to show you guys. If that's not a cup and handle I don't know what is. I can't read to much into it... it's insane... it's telling me the 10-2cms spread will widen to 4.316429?!? that can't be right....

Tue, 11/10/2009 - 16:09 | 126215 mgarrett84
mgarrett84's picture

wouldn't this be considered a text book move during the early stages of a "recovery"?  You need to position for eventual rate hikes but its not very smart to bet on dates so you go out in tenor.

Tue, 11/10/2009 - 16:15 | 126230 Anonymous
Anonymous's picture

Long end cant go any higher or it will choke the economy to death...

Tue, 11/10/2009 - 16:33 | 126270 Oso
Oso's picture

um... economy is already dead.  oh, you mean, if long rates go any higher it will choke the economy dead-ER.   word.

Tue, 11/10/2009 - 16:27 | 126257 Anonymous
Anonymous's picture

in my TOS platform, every stock is HTB (hard to borrow), SPY, QQQQ, DIA, IWM, AAPL, AMZN, TXT, XLE, XLF, etc. I couldn't find one ETB. Talk about a manipulation.

Tue, 11/10/2009 - 16:28 | 126264 bblma1234
bblma1234's picture

simple carry trade.  When it dissolves in the future, sooner rather than later, oh is it going to be ugly. What, don't believe me, I was there in 90 and 00.

Tue, 11/10/2009 - 16:34 | 126271 SV
SV's picture

+1 - Bond Vigs have a memory, as do very few others.  Equity traders are mostly retards with low cortex function (Read: LTM).

Tue, 11/10/2009 - 18:03 | 126413 deadhead
deadhead's picture

One of the best comments ever. beautiful.and accurate.

Wed, 11/11/2009 - 02:24 | 126842 TumblingDice
TumblingDice's picture

It seems to me like the dissolution of this trade will lead to another market meltdown, which will be met with the same solutions as today. If you are going to speculate in paper, this is the best bet long term...this trade will not matter only when the purely extrinsic paper (pixel) speculation ceases to exist in its current form. Probalby not for a while...but as long as the market continues to function we will have a wide 10y2y spread.

Tue, 11/10/2009 - 16:38 | 126278 Anonymous
Anonymous's picture

I'M SORRY I'M SO STUPID

but does an increase in this spread mean that the interest rate of the 10Y is rising relative to the 2Y, or that the *price* of the 10Y is rising relative to 2Y?

Tue, 11/10/2009 - 18:24 | 126454 MTPockets
MTPockets's picture

Yield Spread = 10y yield - 2y yield, so an increase means the differential is greater.

Rate markets can be a little confusing as generally discussed in terms of price (e.g. market rallied, sold off (in price), belly rich to wings (in price terms)), but when it comes to anything you hear as a SPREAD it will be in yield terms.

Tue, 11/10/2009 - 17:02 | 126306 koaj
koaj's picture

was outside 101 park today and there was a marching band and circus animals. elephants holding up flags with their trunks picturing bernanke and geithner

Tue, 11/10/2009 - 18:46 | 126494 Anonymous
Anonymous's picture

Economics 101
Borrow short lend Long, steep curve, recapitalize banks
Every banking crisis in history required STEEP curve
YES you will see steepness on historic levels


Wed, 11/11/2009 - 03:04 | 126858 Johnny G.
Johnny G.'s picture

No opinion, but do you think it worked for Japan or extended the pain?

Wed, 11/11/2009 - 18:08 | 127599 Unscarred
Unscarred's picture

The anonymous post is referring simply to the financial sector - and the steeper the yield curve is, the more banks can replenish capital.

The real question regarding 2008/09 v. 1990s Japan is whether banks can replenish their reserves enough to withstand the coming CRE massacre.

If this was a garden variety recession, the steep yield curve would do the trick.  When the patient is on life-support, you're gonna need a little more than just Tylenol.

Tue, 11/10/2009 - 21:08 | 126632 Carina
Carina's picture

curve steepener trade is very crowded, just as the short dollar trade is crowded.  Watch yields at the long end fall as the dollar rallies in the short term.

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