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2s10s Under 200 Bps For First Time Since April 2009, Curve Collapse Adds Fuel To Fire Of Macro Fund Implosion Rumor

Tyler Durden's picture




 

The 10 Year continues to burrow ever deeper inside 250 bps, last seen at 2.46% or 8 bps tighter on the day, as now the Greek-Bund spread has blown up: did the fake stress tests buy Europe all of one month of time? A country fully backed by the faith and credit of the ECB is once again imploding - what can we say about the "faith and credit" of the ECB then? The only thing keeping the EUR from plunging at this point is the expectation that the Fed will (soon enough) print another cool $2-3 trillion. And the kicker, for Julian Robertson and whatever the macro hedge fund rumored to be liquidating (aside from the TRS which we pointed out yesterday), the 2s10s has just crossed inside 200 bps, the tightest the spread has been since April 2009. Since at least half the market players are still stuck holding on to steepeners, and are now about 30% underwater from the top 4 months ago, add 10x TRS-based leverage, and you can see why whatever fund is blowing up now won't be the last.

 

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Wed, 08/25/2010 - 08:20 | 542532 Sean7k
Sean7k's picture

It is amusing to watch the implosion of currency. The CB has failed to hit it past the woman's tee and now must make the long walk to the green with their johnson out and fully exposed. 

 

Wed, 08/25/2010 - 08:23 | 542537 Implicit simplicit
Implicit simplicit's picture

Its par for the course.

Wed, 08/25/2010 - 08:30 | 542550 Paper CRUSHer
Paper CRUSHer's picture

Sean7k

 

Ya stated,"The CB has failed to hit it past the woman's tee and now must make the long walk to the green with their johnson out and fully exposed".

FX Pair:EUR/YEN & DOLLAR/YEN still green.The ECB have their eyes firmly fixed on this pair as well as......

http://3.bp.blogspot.com/_G43OxOKLrgA/SBCMl7cBqwI/AAAAAAAAABE/YUaqq9MmbE...

......this pair.

Wed, 08/25/2010 - 08:32 | 542557 Sean7k
Sean7k's picture

Can't blame 'em there.

Wed, 08/25/2010 - 08:49 | 542585 HardwoodAg
HardwoodAg's picture

The 'dick-out' rule should apply to the anal-ist's that miss also

Wed, 08/25/2010 - 08:26 | 542545 TooBearish
TooBearish's picture

Ty - I love ZH and know you can't do anything about it - but fukking Cramer's mug staring at me all day is causing a me to have frequent visceral involuntary gagging...help!

Wed, 08/25/2010 - 08:28 | 542546 demsco
demsco's picture

delete your cookies.

Wed, 08/25/2010 - 08:28 | 542547 Sean7k
Sean7k's picture

+infinity. 

Wed, 08/25/2010 - 08:31 | 542552 cossack55
cossack55's picture

Using self-hypnosis, I now only see Ann Sheridan whenever I see the JC ads.  You may, of course, choose a different pleasant face.

Wed, 08/25/2010 - 08:31 | 542556 New_Meat
New_Meat's picture

2Bear

go to your hosts file and enter:

0.0.0.0  secure.thestreat.com

make sure to save it as the text file that it is

- Ned

(Tyler, please feel free to kill this post if it is contrary to ZH interests, might need a better capcha for the new thread "what is hosts file")

 

Wed, 08/25/2010 - 08:36 | 542567 hack3434
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Ad Block 

Wed, 08/25/2010 - 08:52 | 542590 GoldenEye
GoldenEye's picture

I'm not entirely sure why ZH say they cant get rid of the cramer ads, I have a blog of my own and its easy to do.

Open Google adsense ->Adsense setup ->Competitive Ad Filter

Then enter any url that you dont want ads from to stop them from being displayed on your site.

That simple, no more Jimmy C

Wed, 08/25/2010 - 09:01 | 542609 LeBalance
LeBalance's picture

Tyler will now begin charging you for the aversion therapy that you are receiving as evidence has been received that cathartic results are occuring.

Wed, 08/25/2010 - 08:31 | 542554 EagleProjets
EagleProjets's picture

Bernanke's Helicopter Could Move To New Altitude

By Greg Robb WSJ


In an all-out effort to get the economy moving again, Federal Reserve Chairman Ben Bernanke may be getting ready to take his money-creating helicopter to a new altitude.

Bernanke earned the moniker "Helicopter Ben" after the then-Fed governor referenced Milton Friedman's famed "helicopter drop" favorably in a 2002 speech outlining how the Fed could defeat deflation.

(Friedman had argued hypothetically that a central bank could drop currency from a helicopter to stimulate spending.)

Nearly eight years on from that speech, Alan Greenspan's successor is due Friday at 10 a.m. EDT to deliver another vital keynote at the Kansas City Fed's annual symposium in Jackson Hole, Wyo., with the straightforward title, "The Economic Outlook and the Federal Reserve's Policy Response."

In many ways, Bernanke's tenure as head of the world's most important central bank has followed the playbook outlined in that 2002 speech--that to combat deflation, or a sustained negative inflation rate, the Fed would first take nominal interest rates to virtually zero and then take extraordinary action, such as buying government bonds and mortgage-backed securities.

Interest rates have been set between zero and 0.25% since December 2008, and the Fed has purchased $1.4 trillion worth of mortgage securities and $300 billion worth of Treasury securities. In early August, the Federal Open Market Committee took a baby step toward further quantitative easing by deciding to hold the size of the Fed's balance sheet constant through reinvesting principal repayments from mortgage securities into Treasurys.

Deflation would be problematic mostly by raising real, inflation-adjusted interest rates, according to Dean Baker, co-director of the Center for Economic and Policy Research.

While there aren't current indicators of deflation--consumer prices in July climbed 1.2% from year-earlier levels--from Bernanke's perspective, that's by design; outlined in the 2002 speech, the central bank chief says it's better to avoid deflation preemptively then to wait for deflation to arrive.

And as the economy is showing new signs of wilting--jobless claims reaching 500,000, regional manufacturing gauges are sluggish and consumer spending is limp--a slow-growth period could be a breeding ground for deflation, said James Glassman, senior economist at J.P. Morgan Chase & Co. (JPM)

"The economy is surely not in good shape; the odds of a double dip are a long ways from zero," said David Wyss, chief economist at Standard & Poor's, who noted that the economy did not enjoy its normal bounce coming out of the recession.

"It's a half-speed recovery--a lazy U," Wyss said.

Bernanke's comments on the economic outlook will be scrutinized closely, particularly since the Fed downgraded its view earlier in the month. A speech delivered by non-voting Fed member Narayana Kocherlakota insisted that the FOMC was primarily acting on publicly available data on real gross domestic product, unemployment and inflation and not by any yet-to-be-revealed insights.

Mickey Levy, chief economist at Bank of America Corp. (BAC), said the markets want to know how high the hurdle is for further Fed action.

"The market will be listening to nuances--what will lead them to another round of quantitative easing," Levy said.

"We know the Fed isn't there yet," added Avery Shenfeld, chief economist at CIBC World Markets in Toronto.

While most economists don't think the economy will fall back into a recession, many agree that the growth rate is not going to be strong enough to meet the Fed's objective to get the unemployment rate lower.

With unemployment hovering just below 10%, Bernanke's view on the labor market also will be key, and whether the Fed chief shares the view of Kocherlakota that the labor market is weak because of mismatches between the technical level of the jobs available and the skills of the American workforce.

Investors will also want to know if he shares the view of Dallas Fed President Richard Fisher that the slowdown is due to a lack of confidence in Washington on the part of business leaders.

Bernanke, though the most important, isn't the only speaker at the Jackson Hole event.

European Central Bank President Jean-Claude Trichet is a mainstay of the annual gathering, and economists use the event to present their latest research to the high-profile crowd.

Wed, 08/25/2010 - 08:33 | 542560 cossack55
cossack55's picture

It would be a wonderful time for the Yellowstone Megavolcano to pop.  I'm just sayin'.

Wed, 08/25/2010 - 08:35 | 542565 Sean7k
Sean7k's picture

The Keynsian Rapture...

Wed, 08/25/2010 - 08:38 | 542568 EagleProjets
EagleProjets's picture

lol! Yes maybe it will stay Ben helicoper on the ground

Wed, 08/25/2010 - 09:03 | 542614 LeBalance
LeBalance's picture

""In an all-out effort to (completely destroy the) economy, Federal Reserve Chairman Ben Bernanke may be getting ready to take his money-creating helicopter to a new altitude.""

Fixed it for you!

Wed, 08/25/2010 - 12:47 | 543263 JR
JR's picture

The WSJ types espouse the mainline pitch that the evil, nasty manipulators at the Fed were ordained by God to cheat Americans and other countries around the globe out of trillions of dollars.  Well, that argument has a glass jaw. It was the den of vipers called the U.S. Congress, not God, that gave the international bankers their authority to roll the American economy for private gain in the biggest economic swindle ever perpetrated upon man.  Well, that Congress operates at the pleasure of the people. And it’s time to show displeasure by taking back the reins of control over this economy and breaking the bonds that bind and impoverish us.  Replace Congress and abolish the Fed.

Why, in all that’s holy, do we still listen to the likes of the Bernankes and their principles of debt slavery?  Have we not suffered enough?  Jackson Hole is right.

As Max Kaiser says: “The key to understanding the current situation is to understand that house prices, jobs, wages, and pensions in the US are all being attacked with original-issue debt dollar junk.

“This will continue until the middle class has been completely wiped out.”

Here are a few real-life headlines in the past two days on ZH resulting from Bernanke’s handiwork, doing the work of the Fed and not of God:. 

Morgan Stanley Says Governments Will Default, Only Question Is How

Illinois Teachers’ Retirement System Enters The Death Spiral: AIG Wannabe’s Go-For-Broke Strategy Fails As Pension Fund Begins Liquidations

Rosenberg’s Advice For Living In A Japanese-Style Economy: Get Small

Bill Gross Explains Why The Housing Ponzi Must Go On, Or Else Society, Nevermind Pimco, Will Suffer

Goldman: “Forecasters Need to Cut GDP Estimates A Lot Further

IOU Part Two: California To Issue IOUs For Second Year In A Row.

Well, I don’t buy the ruse that all I can do is tighten my belt while Lloyd Blankfein et al. sail off with the American Dream and its accompanying goodies.

America can restore the American Dream for her people by putting an end to this Fed-created swindle, by throwing out this den of viperous congressmen and replacing them with a representative body of the people that will dismantle the Fed.

Wed, 08/25/2010 - 08:31 | 542555 Astute Investor
Astute Investor's picture

We'll be fighting in the streets

With our children at our feet

And the morals that they worship will be gone

Wed, 08/25/2010 - 08:33 | 542562 papaswamp
papaswamp's picture

Durable goods orders out...way below consensus.

0.3% M/M

-3.8% ex transportation

Wed, 08/25/2010 - 08:34 | 542563 johngaltfla
johngaltfla's picture

My bet is on the Irish banking system on the brink. Once it goes, London goes, then NYC goes, then the regionals go and generally speaking the day they shut them down for the "safety of the public" life will suck.

Wed, 08/25/2010 - 11:00 | 542946 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Johngaltfla, it is a race to the bottom. Ireland is going to be one of the early losers.

Wed, 08/25/2010 - 08:42 | 542572 saulysw
saulysw's picture

Dow 10,000 !!!?

Hey, nobody want's to party?

Wed, 08/25/2010 - 08:52 | 542588 Sudden Debt
Sudden Debt's picture

If Obama doesn't steps to the plate and announces a second stimulus the markets are going to go WAY down.

The only reason why I don't short this market is because I still give him some time because of november is getting pretty close so that will normally force him to undertake some action.

normally...

 

Wed, 08/25/2010 - 08:58 | 542600 Sudden Debt
Sudden Debt's picture

And where the fuck are little Timmy and Benny B!

Somebody pleace turn on the red fuck skytracer!

Wed, 08/25/2010 - 09:01 | 542605 Leo Kolivakis
Leo Kolivakis's picture

Appropriate to revisit this interview (a little less than a year ago):

Wed, 08/25/2010 - 09:05 | 542619 deliciousirony
deliciousirony's picture

If the US can ultimately borrow from China etc. @ 0% for 24 months, we should load up the boat.

 

yeah

Wed, 08/25/2010 - 09:47 | 542721 koaj
koaj's picture

10 yr is yielding 2.45%!!!

amazing, considering rates should be moving up. then again, Kang and Kodos in Eccles building know whats best. i wont doubt them again

Wed, 08/25/2010 - 10:26 | 542859 Instant Karma
Instant Karma's picture

'Since at least half the market players are still stuck holding on to steepeners, and are now about 30% underwater from the top 4 months ago, add 10x TRS-based leverage, and you can see why whatever fund is blowing up now won't be the last'

The steepener trade didn't work, although it sounded like a slam dunk at the time.


Wed, 08/25/2010 - 11:13 | 542955 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This bond bubble is not even close to being over yet! Expect at minimum sub 2.3 % 10 year yields. Everyone is going to buy UST bonds for the simple fact it is a safe haven when the market dumps a big brown one these next few months. Then the fireworks as the bubble pops will really start.

Wed, 08/25/2010 - 12:09 | 543142 confimationbias
confimationbias's picture

ZH just now receiving due credit regarding this article on Minyanville's Buzz & Banter (Mr. Practical.)

Great stuff in both cases.

Wed, 08/25/2010 - 13:57 | 543497 viahj
viahj's picture

WTH just happened?

Fri, 10/01/2010 - 03:10 | 617614 Herry12
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Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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