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2s30s Hits Fresh 30 Year High, Just Shy Of 400 bps

Tyler Durden's picture




 

It was just one month ago that the 2s30s hit a fresh high. In the meantime, things for Blackhawk Ben have not gone quite as QExpected: the 30 Year has just hit 4.6%, which with the 2 Year still remaining relatively flat, has led to some dramatic fireworks in the 2s30s curve which just hit a fresh 30 year high of just under 400 basis points. Ben is starting to lose control of tail end inflation expectations, and with that he will soon be forced to intervene much more forcefully in managing prices and yields: small POMOs like today's $2.2 billion which focuses on bonds with a 17-30 year maturity just won't cut it. We expect that either QE2+ will focus much more on the long end (in addition to MBS and Munis) or, in the least, the POMO group will need to reshuffle its purchasing schedule and buy far more tail end bonds than in current schedules.

However as a reminder, as we pointed out in the "Great Regime Change" chart, this does not really imply much for stock prices. As inflation expectations no longer are the key driver for stock returns, the only gating factor since the great moderation is simply "growth expectations", which in our age means nothing less than how much more money can global central banks print. In other words we are now well and truly in the Zimbabwe paradigm: surging inflation is irrelevant for stocks, and we could easily get a Harare stock market in downtown New York, even as a loaf of bread costs 1 wheelbarrow of "money"

 

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Thu, 01/20/2011 - 16:28 | 890972 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Will the Bernank ever see the end of a noose for his crimes?

Thu, 01/20/2011 - 16:35 | 891019 Jaw Knee Cash
Jaw Knee Cash's picture

When you have the power of the state (aka banks) standing behind you, it's not a crime. It's public "service".

Thu, 01/20/2011 - 16:42 | 891047 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

310m people in the U.S.

99% of them getting screwed hard daily by a few filthy criminals the Bernank, Geithner, et al.

Generations who have yet to be born have already had their generation screwed over by the same criminals.

What happened to the angry mobs. Don't people care anymore. Don't people get angry anymore? Amazing what Aspartame and Fluoride have done.

Thu, 01/20/2011 - 16:44 | 891075 101 years and c...
101 years and counting's picture

"What happened to the angry mobs"

They've been distracted by Facebook.  If they are starving, they get food stamps.  That about takes care of the entire population......

Thu, 01/20/2011 - 17:06 | 891215 tmosley
tmosley's picture

I get the feeling that he will be torn apart by the mob before they manage to get the noose strung over a light pole.

That will be a sight to see.  I'm hoping I can get a chunk.  I'll put it next to my piece of the Berlin Wall.  Preserved in acrylic glass, of course.

Thu, 01/20/2011 - 16:32 | 890974 hugovanderbubble
hugovanderbubble's picture

Thanks, for sharing it

 

Im worried with Munibonds spreads...too

Thu, 01/20/2011 - 16:30 | 890984 thepigman
thepigman's picture

Anybody get it yet?

The bernanke's a loser.

Thu, 01/20/2011 - 16:32 | 891001 thepigman
thepigman's picture

The bs is running out and all we got

is a loser fed chair.

Thu, 01/20/2011 - 16:32 | 890987 Miles Kendig
Miles Kendig's picture

Secretariat is off cleanly ... as Sham fades

http://www.youtube.com/watch?v=k2KfxdjjvDE

Thu, 01/20/2011 - 16:31 | 890992 Robot Traders Mom
Robot Traders Mom's picture

I'm waiting patiently for Harry or one of the other trolls to miraculously announce they are locking in profits on the steepner trade to buy more AAPL.

Thu, 01/20/2011 - 16:39 | 891046 topcallingtroll
topcallingtroll's picture

Sorry to disappoint you, but even a troll knows to stay away from aapl.

Thu, 01/20/2011 - 16:35 | 891021 NOTW777
NOTW777's picture

cnbc explanation; first we had a strong rally because of obama policies (obamacare, gayification of military, global apologies, etc.); now, if rates rise its because of the strong economy attributed, of course, to obama.  the "recovery" is on. all is good - especially for big bankers

Thu, 01/20/2011 - 16:35 | 891025 thepigman
thepigman's picture

Rates going straight up in a dead

economy. Stupid Princeton troll.....

please manipulate the shit out of

things even more so based on your

studies.

Thu, 01/20/2011 - 16:43 | 891069 EscapeKey
EscapeKey's picture

They need to go up. We need to have all this bad debt liquidated so the economy can get healthy again. It will be one hell of a hangover, but what is this all-weekend binge session any better you think?

Thu, 01/20/2011 - 16:37 | 891028 TruthInSunshine
TruthInSunshine's picture

Keep on working that old Keynesian/Central-Planning magic, Ben Bernank.

Keep on, Keepin' on.

It all seems to be working out for you, and you seem firmly in control.

 

 

 

 

 

 

 

 

 

Not.

Thu, 01/20/2011 - 16:36 | 891029 Orly
Orly's picture

QExpected, pronounced, "kwek-spec-tit."

Hilarious.

Thu, 01/20/2011 - 16:55 | 891143 Miles Kendig
Miles Kendig's picture

hehehe  +1

Thu, 01/20/2011 - 16:37 | 891033 topcallingtroll
topcallingtroll's picture

I had student loans at nine and ten percent. Bought a house at 9.75 interest rate. A rise in interest rates are no problem at all if the economy keeps humming. Brazil peacefully withstood 7000 percent inflation one year and managed a reasonably soft nonviolent landing (for brazil) and now they are just fine. It has always been considered easier to.stop inflation rather than deflation and for the majority inflation is far preferrable. Do i like the idea that we are willing to sacrifice people on a fixed income or who have fixed annuities or insurance contracts? Of course not, but for the majority inflation is the best option and inflation we shall get if we are lucky.

Thu, 01/20/2011 - 16:40 | 891052 Robot Traders Mom
Robot Traders Mom's picture

Please feel free to expand on what might be the dumbest fucking thing ever said on ZH.

Thu, 01/20/2011 - 16:40 | 891053 TruthInSunshine
TruthInSunshine's picture

I'm not going to junk you, but I will tell you that you fail at the economics of life.

Deflation would be far preferable right now for the overwhelming majority of Americans, at a time when labor is the cheapest commodity of all, and there is no 'stickiness' in wages or benefits.

This isn't the world or the U.S. in 1933...but fuckface Bernanke knows that, as he's just bailing out his masters, anyways.

Thu, 01/20/2011 - 17:33 | 891353 redarrow
redarrow's picture

Exactly. The economy now is not similarly structured as in 1933 but still the pump monkey is hell bent on justifying his thesis.Back then you had only America with the rest of the world largely undeveloped and riddled with internecine war. The demand was there back then and America did well over the next few decades with being the workshop of the world. Now, you have all the manufacturing and many service jobs shipped overseas and huge competition for demand, wafer thin margins, tapped out consumers. All the QE is doing is only fattening the banks, not many dollars are going into factories and new equipment purchases these days. So to say that QE will save the day is unwise in the background of the  demand and structure of the global economy.

 

I think the fool will miserably fail and will have to stop short of further QE. I do want to see the fool be removed from office and the mandate of the Fed changed to only price stability.

 

 

Thu, 01/20/2011 - 16:41 | 891054 Robot Traders Mom
Robot Traders Mom's picture

.

Thu, 01/20/2011 - 16:44 | 891072 Bold Eagle
Bold Eagle's picture

Forget about inflation, we will get hyperinflation or stagflation. US default is getting closer.

Thu, 01/20/2011 - 16:56 | 891152 Miles Kendig
Miles Kendig's picture

Now I know where all the Bush era broccoli went

Thu, 01/20/2011 - 16:39 | 891048 Point Being
Point Being's picture

I just wanted to update you ZH members living in warm(er) climes...

Bird Count here: Zero

 

Temp: Zero

 

Hedged: Zero

 

 

Thu, 01/20/2011 - 16:40 | 891049 AccreditedEYE
AccreditedEYE's picture

And equities will continue higher... Well, here it is Ben. You asked for it, you wanted it, you CREATED it now you gotta f-ing deal with it. Let's see you try to keep it "contained".

Thu, 01/20/2011 - 16:43 | 891064 thepigman
thepigman's picture

You know, if you're jacking equities,

Ben, you DON'T brag about it. You

keep your mouth shut. Stupid

academic.

Thu, 01/20/2011 - 16:44 | 891081 thepigman
thepigman's picture

Who wants to buy ramped stocks?

Know what I mean, Ben?

Thu, 01/20/2011 - 16:48 | 891097 thepigman
thepigman's picture

Ben was the kid in the front row of

third grade always wildly waving his

hand to answer questions. Now he runs

the fed.

Thu, 01/20/2011 - 16:43 | 891065 Ancona
Ancona's picture

Hmmmmmm...................Just where in the hell did I leave my pitchfork....?

Honey? did you find those torches yet...?

Aha! Here it is! I found it......and the rope too!

Thu, 01/20/2011 - 16:43 | 891066 HamyWanger
HamyWanger's picture

This is good news. A rise in bonds rates will stimulate equities.

Thu, 01/20/2011 - 20:21 | 891841 alter ego
alter ego's picture

Explain to me.

If the money that goes primarily into equities right now comes from the Fed

monetizing the US debt.

How do you think the Fed is going to get the money to inject in equities if

interest rates go ballistic?

Who pays the bill?

China?

US Tax payer?

Tell me because the numbers won't add up.

 

  

Thu, 01/20/2011 - 16:44 | 891073 rubearish10
rubearish10's picture

Equities are too fragile to withstand even minor inflation rumbles. This is what we're seeing now, "minor inflation rumbles". Stocks will crack before signs of the next leg up in commodity price inflation. Book it Danno!

Thu, 01/20/2011 - 16:44 | 891076 Amish Hacker
Amish Hacker's picture

I don't see how focussing on the long end is going to bring rates down, given that this has been the strategy for a while now, and 30-yr rates have gone UP. When you announce ahead of time that you're going to be buying a gazillion dollars worth of ANYTHING, you are going to get a lousy deal. Fortunately, we're only talking about tax dollars here, not real money.

Thu, 01/20/2011 - 16:51 | 891110 ATG
ATG's picture

However as a reminder, as we pointed out in the "Great Regime Change" chart, this does not really imply much for stock prices

The record clearly shows high real rates like 400 BP differential between 2s and 30s snuff out equity returns and growth

Thu, 01/20/2011 - 17:05 | 891207 notadouche
notadouche's picture

Obama came out and declares Bears 20 Packers 17.  So let it be written so let it be done.  Our dear leader has spoken, now all must obey.  

Thu, 01/20/2011 - 18:54 | 891609 asdasmos
asdasmos's picture

I love how there is no sign of harry, robo et all in this one.

Thu, 01/20/2011 - 19:15 | 891661 Wheatman
Wheatman's picture

Tyler, have you given up your bond bull insanity yet? The long end is collapsing, and you print rheems of "theory" to support yet more rallies in this worthless crap. Give it up and sell the F#$% out of this worthless toilet paper. On a deflationary scenario, the Federal debt will crush the USA, hence systemic bankruptcy. On an inflationary scenario, bonds are fuked. Either way bonds are fuked. Yes Tyler?

Thu, 01/20/2011 - 20:16 | 891828 alter ego
alter ego's picture

Reality bites.

Bernanke can cry and fight as much as he wants but the spread on the

Treasuries are going to make the dirty work to rise interest rates.

In this over-leveraged economy just a small increment in the rates can

produce a cardiac arrest to the system.

I believe the day of reckoning is coming.

More sooner than later

 

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