This page has been archived and commenting is disabled.

2s30s Close Above 400 For The First Time Ever

Tyler Durden's picture





 

Courtesy of Gen Ben, we passed another landmark in rates: the 2s30s closed at an all time high of just over 400 bps. Ths is the widest closing spread in history. What does this mean? Simple: instead of taking the inverse method which has worked so well in equities, where banks make money through ever-increasing trading volumes (well not anymore) at the expense of margins, with ever more incursive electronic trading, the Criminal Reserve has decided to pull a Harry Winston and get banks to get their entire P&L from the least amount of transactions (in this case mortgages). Why so? Because as we pointed out recently, mortgage origination and refinancing volume has plunged to the lowest in a year. And with no volume, bankers are forced to make money increasingly more on spread from those who are desperate enough to go through the pain of the entire mortgage origination nightmare, even if (or especially) it means ending up with a mortgage that has no actual mortgage note (yes, that is a factor... in addition to mortgage rates that continue to be close to year highs). In other words expect to see the 2s30s to go even steeper until it is made obvious that banks will no longer make money on the curve. At which point it will be the Fed's obligation to go out and start buying up the long-end in mortgages, just like in March 2009. As stated before, we expect this, together with the required market crash to spawn QE 2.1+ Lite to occur some time in April, May, around the time the extra $195 billion in SFP liquidity is absorbed by the market. In the meantime, the Fed can only hope that stocks continue rising ever higher so as to have as great a buffer as possible from which to enter free fall. And 'trivial' events like Egypt are not allowed to stand in the way.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 01/31/2011 - 19:59 | Link to Comment Rainman
Rainman's picture

DJIA being  'buffered for a free fall '. Guess that means the higher you go, the less deader you are when you hit the ground. 

Mon, 01/31/2011 - 20:06 | Link to Comment cswjr
cswjr's picture

It's all about terminal velocity.  This way they can say that the rate of decline of the DJIA has stabilized.

 

Tue, 02/01/2011 - 07:37 | Link to Comment Sudden Debt
Sudden Debt's picture

does terminal velocity still stands in a vacuum?

Tue, 02/01/2011 - 06:59 | Link to Comment bigelkhorn
bigelkhorn's picture

I have bank troubles already. i walked in today, and they kept asking why I need to take out 5k...what a Joke. I am getting nervous that this collapse is going to come quickly. Here is an interesting economic report for 2011. I have been following these guys for a while and they are good. Check out their latest report here ==> http://bit.ly/hjE236

Mon, 01/31/2011 - 20:01 | Link to Comment whatsinaname
whatsinaname's picture

That chart looks like the S&P500 since November..

is there anybody that benefits from this spread ??

Mon, 01/31/2011 - 20:03 | Link to Comment alter ego
alter ego's picture

 

Bernanke is the new Buzz Light Year! (Toy Story)

    To The Infinity and Beyond!!!!!!

Mon, 01/31/2011 - 20:09 | Link to Comment alter ego
alter ego's picture

Reality is screaming hard to the Fed and US economic policy!

The day of reckoning is here, watch out with for big correction in the Market.

Me think that they will crash the stocks to let Treasuries to breath a little

bit. Later on they will ask for a QE3 to save the planet!

Save the planet is figurative.

 

Mon, 01/31/2011 - 20:29 | Link to Comment Chris Jusset
Chris Jusset's picture

Alter Ego wrote:

The day of reckoning is here,

The Criminal Reserve never received the memo discussing the concept of a "day of reckoning" ... Instead, according to Banana Ben, why should there be a "day of reckoning" when you can perpetually kick the can down the road?

Mon, 01/31/2011 - 21:53 | Link to Comment bobert
bobert's picture

"Crash stocks to let Treasuries" rise?

How much higher can bonds go?

Mon, 01/31/2011 - 20:10 | Link to Comment whatz that smell
whatz that smell's picture

terminal velocity, bitchez!

Mon, 01/31/2011 - 20:11 | Link to Comment IrrationalMan
IrrationalMan's picture

the fed is really trying to prime the economy to get it going again.  There is a fine line between priming and flooding the engine though. 

Mon, 01/31/2011 - 20:16 | Link to Comment Carl Marks
Carl Marks's picture

Spread em bitchez!

Mon, 01/31/2011 - 20:23 | Link to Comment Racer
Racer's picture

In Ireland a 92 year old was denied a bed for ongoing care who was advised  to have 24 hour care... and was sent home to live on their own with carers coming in a few times a day....

 

What? Has it come to this... to push a person out so they can hopefully (to the gov) die and cost them less?

Mon, 01/31/2011 - 20:29 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

Libertarians in Ireland?

Mon, 01/31/2011 - 20:48 | Link to Comment tmosley
tmosley's picture

Libertarians wouldn't have taken 40+% of their incomes, so they could have actually afforded to care for themselves instead of being forced to rely on an unreliable state.

Mon, 01/31/2011 - 21:27 | Link to Comment snowball777
snowball777's picture

They also wouldn't have any hospitals available in the first place because they wouldn't be able to make enough money off of the few people who could afford them.

Mon, 01/31/2011 - 21:32 | Link to Comment Pants McPants
Pants McPants's picture

Yup, exactly right.  Libertarians are all about sticking it to their fellow man...you know, wringing every last dollar they can out of the piles of corpses that inevitably pile up as a result of hair-brained scams.

Jackass.

Mon, 01/31/2011 - 23:21 | Link to Comment Thomas
Thomas's picture

That's true. I am a libertarian, and I eat the flesh of rotting old people. It is liberating.

Tue, 02/01/2011 - 07:45 | Link to Comment Sudden Debt
Sudden Debt's picture

old people? babies hae more tender meat you know.

how do you like your meat? Red, well done...?

what's your favorite sauce to go with it?

Mon, 01/31/2011 - 23:44 | Link to Comment snowball777
snowball777's picture

No, they're just unable to understand that 'products' with inflexible demand are not subject to market forces in the same way that things like gold and sugar are and that corporations most certainly are in favor of 'wringing every last dollar' out of people.

Tue, 02/01/2011 - 00:51 | Link to Comment Flakmeister
Flakmeister's picture

Bravo!

Mon, 01/31/2011 - 21:43 | Link to Comment tmosley
tmosley's picture

You're right.  Everyone would use neighborhood clinics that would be on every street corner instead of using huge corporate controlled hospitals.  99% of people would have all of thier needs met in these places, and those few requiring more difficult treatment would go to specialist clinics.

Prior to the government interfering in medicine in the US, doctors were members of the middle class, and medicine was available cheaply to the masses.  Hell, doctors made house calls.  http://mises.org/daily/4276

Oh, sorry, you were just being a liberal jackass.

 

Tue, 02/01/2011 - 00:11 | Link to Comment snowball777
snowball777's picture

99% of people would "have their needs met",...but 60% of people that go BK...do so due to medical bills. Try again, this time with your brain engaged.

Perhaps you're interested in returning to a time when 1000x more people died from TB, 10x people died from fucking pneumonia, and twice as many people died per 1000 citizens...best of luck getting anyone that isn't wearing a teabag on their head to buy into that shit.

As for doctors being in the lower middle class then and upper middle class now, it's called supply and demand (you'd think an Austrian would at least get that part). A huge influx of population (and very few of them doctors) and voila...their inflexible product was worth what the market will bear. Is that in part due to the AMA? Possibly, but so is the rise in standards of care. 

Oh sorry, you were just living in a stinking pile of Austrio-topian bandini.

Tue, 02/01/2011 - 10:47 | Link to Comment citizen2084
citizen2084's picture

So, is the increase in TII diabetes, asthma, and autism due to the govt manged healthcare?

 

 

Tue, 02/01/2011 - 11:42 | Link to Comment MachoMan
MachoMan's picture

It hasn't been too long in these parts since doctors accepted pigs, meats, canned goods, and services in exchange for medical help...  to say that the world goes without doctors is a bit of a stretch...  about the only thing that can be said for sure is that the wastes associated with large hospitals would likely be a thing of the past.

Now, the question is without large hospitals, how do you get care to certain people?  Well, my guess would be that there would be less redundancy of equipment...  which may lead to less health services...  but, the flipside is that with increased care for all, there are less capable health professionals, and thus the people operating on you as well as the technicians operating the machines are devalued...  just like benny bucks...  just like college degrees.

There are a myriad of points and counterpoints, but in the end, I believe the largest consideration is simply cost...  and, frankly, the medical field, as situated, is wholly unsustainable...  and universalized healthcare will not help in the least.

Mon, 01/31/2011 - 21:55 | Link to Comment bobert
bobert's picture

Some would rather be cared for and die at home.

Mon, 01/31/2011 - 20:17 | Link to Comment duncecap rack
duncecap rack's picture

What would cause this graph to go into negative territory? Would that not mean the two year was yielding more than the 30 year? How could that happen?

Mon, 01/31/2011 - 20:22 | Link to Comment duckduckMOOSE
duckduckMOOSE's picture

This nice article says that occurs when there is expectation of a recession

http://en.allexperts.com/q/Bonds-1071/2010/12/Treasury-Curve.htm

Mon, 01/31/2011 - 21:56 | Link to Comment bobert
bobert's picture

Check the chart back in 2006/2007 and subsequent economic events for your answer.

Mon, 01/31/2011 - 20:19 | Link to Comment buzzsaw99
buzzsaw99's picture

long short arb is a legitimate way to make money.

flip that bond is a legitimate way to make money.

banks are important to our general well being.

mort. origs are down, bonuses down.

do not kick a poor banker in his nuts while he is down.

Mon, 01/31/2011 - 20:31 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

kick in the nutz is treating the symptom.

kick in the windpipe is solving the root cause.

Mon, 01/31/2011 - 20:42 | Link to Comment buzzsaw99
buzzsaw99's picture

That's so unfair. [/jamie dimon]

Mon, 01/31/2011 - 21:02 | Link to Comment Former Sheeple
Former Sheeple's picture

+ a Trillion, on The Bernank's tab!

Mon, 01/31/2011 - 21:28 | Link to Comment snowball777
snowball777's picture

Fuck his nuts; I'm going for teeth and kidneys.

Mon, 01/31/2011 - 20:21 | Link to Comment New_Meat
New_Meat's picture

"At which point it will be the Fed's obligation to go out and start buying up the long-end in mortgages, just like in March 2009."

Precedent is early 1950s, where U.S. (WWII) debt was close to GDP and the long bond was held down via certain opaque operations.  Other condition to get out of this 'problem' was local (i.e. U.S.) 'growth.'  Since the U.S. war industry had the production processes (including improved business processes, thanks Ford wunkerkinds) and they were selling into a black hole of demand, U.S. production boomed, Union activity boomed, quality (win the future), etc.

So the basic pattern was to grow through the problem.

bbbbbuuutttt, that isn't sustainable today. (sayeth the nay sayers)

There has been some great discussion how QE works in a nominally-zero interest (might one say some kind of religious environment that disallows interest?) environment.

CogDis-here's the Bernank advocating/proponent for an approach that is, well, antithetical to his stereotype.

Read "Seven Pillars of Wisdom" young and eventually learned the public story.  Never thought it would affect me and mine at this stage.

Go play, children,

- Ned

Mon, 01/31/2011 - 20:28 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

What's not factored in now with national debt of $14T is that GSEs are not counted but are really on the gov. Balance sheets so add 5.5T and we are closer to 20 trillion in debt.

Mon, 01/31/2011 - 20:21 | Link to Comment Tic tock
Tic tock's picture

This is a cynical post, even from TD. For example, the extra B$195. could be used to prop up emerging markets.

Mon, 01/31/2011 - 20:29 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

195B IS an emerging market.

Mon, 01/31/2011 - 20:32 | Link to Comment herman55
herman55's picture

As per Alter Ego's comment above about Buzz Lightyear....my son, a junior in college in petroleum engineering, dressed up as Buzz Lightyear for Halloween last fall, went to the college hockey game, drank way to much, was confronted by the police.....talked into his Lightyear wristwatch and shouted in front of the police and on the arena jumbo-tron, ..."to infinity and beyond". Whereupon he was arrested. The legal fees exceeded $3000.00 for a "minor in possession" charge. He explained to me that he was doing his part for "Americas brewers"..... he'll be 21 next month, if i don't wack him first.

Mon, 01/31/2011 - 20:55 | Link to Comment Rainman
Rainman's picture

Consider it a meager indoctrination fee to learn the ways of the Man. The crying drunk teen daughters cost much more before it is over.....trust me.

Tue, 02/01/2011 - 11:47 | Link to Comment MachoMan
MachoMan's picture

For that kind of money, you got taken to the cleaners...  thats a couple hundred dollar plea deal here...  you will not win in district court for certain and, even if you exercise your right to a de novo appeal, you will likely lose at the next level... 

Next time, find an attorney that is willing to tell you that you're going to lose and need to plea and does not want to take/waste your money chasing unicorns.

Mon, 01/31/2011 - 20:34 | Link to Comment Misean
Misean's picture

All of your capital is now belong to us...

Keep the printers primed Benny!

Mon, 01/31/2011 - 20:34 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Baltic dry now 1107 down another 2.5%. if we stay on this course of losing about 2.5% a day we will be in triple digits by next week.

And NOBODY CARES

Mon, 01/31/2011 - 20:46 | Link to Comment bob_dabolina
bob_dabolina's picture

It's not that nobody cares as much as it is irrelavant. We have central banks everywhere printing money and that pushes ALL assets up. The analogy commonly referenced here is that if the stock market is a measure of the strength of an economy than Zimbabwe would have the strongest economy in the world. You have to pay attention to all things especially commodities and you will notice things like rice being lock limit up today (also mentioned on ZH)

The consequences of this "monetary accommodation" is that the price of all things you need in life rise by orders of magnitude greater than stocks. The price of food is up, the price of energy is up, the price of clothing is up. This is part of the reason you are seeing riots in these smaller countries because a greater percent of income is needed to purchase the things you need to live.

Mon, 01/31/2011 - 20:54 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

I agree it's irrelevant. Just like every economic report, job report, even earnings reports.

The financial media as a whole has been cheer leading and misleading as why we have had such straight up gains for the last six months. As we are to believe economic recovery is the reason.

Mon, 01/31/2011 - 21:30 | Link to Comment RockyRacoon
RockyRacoon's picture

Au contraire!  CNBC will care when the index turns up and they'll hail it as evidence of the recovery.  Until then, hide it in the basement with the crazy aunt.

Tue, 02/01/2011 - 02:18 | Link to Comment lynnybee
lynnybee's picture

........ & nobody cares .    how sad, really.   ......... let's just get it over with / am sick of the anticipation & the anxiety . 

Mon, 01/31/2011 - 20:39 | Link to Comment John McCloy
John McCloy's picture

Lets be real here..Who posseses more power than the Federal Chairman? Who can singlehandely impact the globe unchecked than a man such as Bernanke with the Wall Street titans and media in his corner? 

   Certainly not the President is as powerful as Bernanke and this is probably the first time this disparity has become so overt only out of necessary for the elites to maintain the status quo. They much prefer the shadows.

Mon, 01/31/2011 - 20:45 | Link to Comment chump666
chump666's picture

China. 

Mon, 01/31/2011 - 20:59 | Link to Comment John McCloy
John McCloy's picture

Yeah but I keep coming back to the same question with China. How reliant are they upon our madness levels of govt spending which relates to consumer spending deriving from the U.S. 

   I believe they need us considerably more at the moment as evidenced by our corporate margins contingent on their slave labor. 

Chicken or the egg? I do not know. I do know we have the reserve currency however. How fucked is China if we stop consuming and default on our debt? I would imagine China would enter a spiral they could never recover from.

Mon, 01/31/2011 - 21:03 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

China doesnt have the debt we have. They also have strongest manufacturing base ever in the world.

USA is more fucked.

Mon, 01/31/2011 - 21:31 | Link to Comment RockyRacoon
RockyRacoon's picture

Manufacturing won't do diddly if there is no market.   Kinda like tight stops:  No buyers, no sale.

Mon, 01/31/2011 - 23:15 | Link to Comment ConfusedIdiot
ConfusedIdiot's picture

Id fight Gandhi

"China doesnt have the debt we have. They also have strongest manufacturing base ever in the world."

 

Correct about the debt. However, USA is still #1 in the world in total dollar output from manufacturing.CI

Mon, 01/31/2011 - 21:15 | Link to Comment chump666
chump666's picture

China is more fucked if it takes up more inflation.  Already they are filtering Egyptian protest footage.  Point is, as creditor nation (China) to a debtor (US), the debtor is already at a loss.  China can take a hit, but the US can't, who is going to lend to the US: if China decides to send a message to Obama?

I have always said, China shorts the US, there will be a 1000 hedge funds as allies.

 

 

Mon, 01/31/2011 - 21:35 | Link to Comment blunderdog
blunderdog's picture

Don't we have a few thousand rich American patriots who would gladly to come to the nation's aid in times of true existential threat?

Mon, 01/31/2011 - 22:05 | Link to Comment bobert
bobert's picture

This discussion has played out here before and I believe the answer is: He with the largest and most effective military (and or nukes) wins. That is still the US. Isn't it?

Mon, 01/31/2011 - 22:19 | Link to Comment blunderdog
blunderdog's picture

I'd be impressed if you can put down popular revolt with nukes, but what the hell do I know?  I thought we were talkin economics.

Tue, 02/01/2011 - 00:32 | Link to Comment bobert
bobert's picture

I definitely prefer economics!

 

Mon, 01/31/2011 - 20:44 | Link to Comment chump666
chump666's picture

german 2ys are up, we are in an rate cycle, but a stock correction is imminent.

 

Mon, 01/31/2011 - 21:04 | Link to Comment LePetomane
LePetomane's picture

Tunisia and Egypt have imported all the inflation they can eat.

 

It's only wafer thin.

Mon, 01/31/2011 - 21:29 | Link to Comment dearth vader
dearth vader's picture

Go fart somewhere else.

Mon, 01/31/2011 - 21:34 | Link to Comment LePetomane
LePetomane's picture

It's a free internets.

Mon, 01/31/2011 - 21:14 | Link to Comment alter ego
alter ego's picture

Watch out those Treasury Bill yields.

They are showing that the Fed can't print money indefinitely.

Bernanke and his friends at the New York Fed know that!

Watch out my friends we are entering in uncharted territories.

Let us re-cap

In 2008 Lehman Brother went caput, then Paulson and friends freaked out.. "There is no liquidity"

The Fed started to pump 700Billion (the real numbers were around trillions)

and everybody seemed to start to breath, however just around the corner,

 the market, Bernanke and the new administration asked for QE2 and this

wish was granted by the US Tax payer.

Now the economy became a junkie with all this artificia,l non productive,

toxic dollars and now the Fed Bazooka started to fart.

But  as everything in life, reality prevails, therefore you have to pay attention to:

1) Big market correction in stocks to defuse the pressure on TBills.

2) A false flag event, aka (new Sept11), that would eliminate to the footprintso of this psico-economic policy.

Let just keep it simple!

 

Mon, 01/31/2011 - 22:04 | Link to Comment OptionsHedge
OptionsHedge's picture

when the market tanks, the $ crashes up, gold/PM's collapse , commodities smash limit down for days, but it will be great to buy cheap chewing gum, no:)

Mon, 01/31/2011 - 22:09 | Link to Comment bobert
bobert's picture

Both of the events that you mentioned will create upward pressure on bonds and downward pressure on US interest rates I would think. That's simple enough.

Mon, 01/31/2011 - 21:31 | Link to Comment OMG
OMG's picture

Could this be a mistake are they using Intel processor's?

Mon, 01/31/2011 - 21:38 | Link to Comment blunderdog
blunderdog's picture

I dunno, I'm not particularly concerned here.  The goal of Ben/Obama/whoever isn't to print forever or keep the ponzi going forever.

It's only to be last country standing. 

I'd say we stand a pretty good shot at that.  We'll go through hecka pain, but if 50% of the world goes into catastrophic collapse, we'll still win the future.

Mon, 01/31/2011 - 21:55 | Link to Comment steveo
steveo's picture

Love that, "win the future", not quite a Bush-ism, but close

Tue, 02/01/2011 - 08:15 | Link to Comment New_Meat
New_Meat's picture

wtf?

Mon, 01/31/2011 - 21:57 | Link to Comment steveo
steveo's picture

Stocks, bonds, news. all manipulated.   One trusted leading indicator Dr Copper became anti-correlated with the S&P this week, in a sign of WTF Robot trading to fool you.

Doctor Copper had a .42 correlation with SPX in month of January, but a negative correlation in the last week.   Odd, odd indeed.   

 What is funny is that I have seen "Dr. Copper"posted 20 times on the blogosphere.   Indeed - we are retail, and we are observed by the Numerati aka Quant Spider Bots (QSB's).  There are now people making a specialty career on getting the best of you via advertising or market manipulation, and Google makes it all possible.

Check out these correlation charts.

http://oahutrading.blogspot.com/2011/01/is-doctor-himself-sick-correlati...

 

Mon, 01/31/2011 - 22:13 | Link to Comment bobert
bobert's picture

It's not scientific, however, correct me if I'm wrong. Has not the Hong Kong stock market had an inverse correlation to the Shanghai stock market of late? What's that say?

Mon, 01/31/2011 - 22:00 | Link to Comment Downtoolong
Downtoolong's picture


..with no volume, bankers are forced to make money increasingly more on spread from those who are desperate enough to go through the pain of the entire mortgage origination nightmare..

 

You’ll be waiting for me a long time boys. I paid off my last mortgage back in 2005, and I’ll live in a shack in the Ozarks before I ever originate another with you pinstriped pirates, or any other major long term debt for that matter.

Mon, 01/31/2011 - 22:13 | Link to Comment Buttcathead
Buttcathead's picture

thanks for that ZH.  It dont matter, I is bankrupt. Stocks, bonds, & food can boom or bust, either way I am still phucked.

Mon, 01/31/2011 - 22:19 | Link to Comment bobert
bobert's picture

From scarcity to prosperity.

It's possible!

Mon, 01/31/2011 - 23:07 | Link to Comment Quaderratic Probing
Quaderratic Probing's picture

"And 'trivial' events like Egypt are not allowed to stand in the way."

Sinking rats do the same they hold even their friends underwater in desperation... are you listening Europe?

Mon, 01/31/2011 - 23:13 | Link to Comment ConfusedIdiot
ConfusedIdiot's picture

Id fight Gandhi

"China doesnt have the debt we have. They also have strongest manufacturing base ever in the world."

 

Correct about the debt. However, USA is still #1 in the world in total dollar output from manufacturing.

Tue, 02/01/2011 - 06:27 | Link to Comment Quintus
Quintus's picture

I wonder what the US is manufacturing then?  I've had a quick look around my house and there isn't one single thing in it that was made in the US.  Not one.  Even the US brands (Dell, Apple etc) are manufactured somewhere else.

On the other hand, it seems the good people of Egypt have had no problem finding products made in the US, as the Egyptian police and military have been distributing them with some vigour recently.  Perhaps I have answered my own question and should be grateful that the fruits of American manufacturing are not found anywhere near where I live.

Tue, 02/01/2011 - 12:04 | Link to Comment sbenard
sbenard's picture

For the benefit of someone like me who admittedly knows zilch about the bond market, what does this term 2s30s mean? I've seen similar terms here on ZH for months, but I'm finally asking for a brief explanation! Thanks!

Do NOT follow this link or you will be banned from the site!