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Ben Bangs Bonds Out of Range

Bruce Krasting's picture




 
The long end of the bond market has been stuck in a range for almost two
months. I think it may have broken out of the range today. The closing
price on the bond contract today was 118.99. The low set back on 12/14
was 119.05.

It didn’t take much for the contract to stumble to this foul smelling
level. The last 50bp came thanks to Bernanke. At one PM the minutes of
his speech came out. Essentially Ben commits himself to continuing QE. We take another step down in bond land. Maybe an important one.

The day chart:

Knee jerk reactions and hourly market trends don’t mean much in the
scheme of things. What consequence Ben had today will be lost in the
noise a few days from now. That said, it's interesting to watch the
market’s reaction. When Ben said, “We’re going to continue with the QE” bonds traded cheaper.

Ben’s not going to quit. QE2 will run its full course. Long bond yields
are going up as a result. It must kill Ben to see how the market now
trades him and his policies. Ben is an academic, no market experience to
speak of. Maybe he his clueless how the boys in the futures pits are
pricing him these days. If so, he should ask his partner in QE crime,
Brian Sack. He runs the NY Fed desk and does understand market sentiment. Brian would tell Ben the markets are fading him. And making money in the process.

I lived through this once before when William Miller was running the
Fed. The markets beat this poor guy to death. He couldn’t say a word
with out stocks, bonds or the dollar falling out of bed. I was one of
many who would just short things ahead of any of his scheduled comments.
Ducks in a barrel.

Miller came in March of 1978. He was out by August the following year. The markets crushed him. They did him in.

 

 

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Fri, 02/04/2011 - 06:08 | 934047 Husk-Erzulie
Husk-Erzulie's picture

Thank you again Bruce, these are my absolute favorite ZH threads (then Reggie).  Take care of your back mate (Valerian Root is excellent for keeping it from getting bound up...it's not just for sleepy time.)  February is New Englands roughest month but its also short.  I think everyone who has ever lived in an old New England farmhouse has had to dig up the poop pipe in a whirling snow storm - somehow it's just written in under "dues".  Good Cheer :-)  HEZ

Fri, 02/04/2011 - 02:21 | 933954 celticgold
celticgold's picture

BB record is good to go .....bust

Fri, 02/04/2011 - 00:36 | 933806 RoRoTrader
RoRoTrader's picture

hey bruce,

you know, one of the things i learned along the way was that meaning comes from context.

got a face to put on who is the bond market?

i bet a lot of people reading here at ZH don't know.........double down and bet you have the talent to inform.

Fri, 02/04/2011 - 01:49 | 933917 whatsinaname
whatsinaname's picture

My guess is the TBTF banks are the bond market and now increasingly BB owns the turf !!

Thu, 02/03/2011 - 23:52 | 933718 fedspeak
fedspeak's picture

http://chart.ly/7g3yn8n      Feb 4 Futures charts..

The writing is on the wall.  Friday Nonfarm Payrolls expectation in 150K and no matter what..the Bond Market will be mighty volatile at the minimum as Helicopter Ben has single handedly succeeded in exporting inflation througout the world even though there is 'no inflation' back home. 

Thu, 02/03/2011 - 23:50 | 933713 TruthInSunshine
TruthInSunshine's picture

The 100% confident Ben Bernanke and his amazing track record:


Bernanke speaking on October 27, 2005: There's No Housing Bubble to Go Bust - washingtonpost.com

Thu, 02/03/2011 - 23:42 | 933694 RoRoTrader
RoRoTrader's picture

btw BK.........dumped the short GBP/USD on the first pullback to 1.6155 entry so a b/e trade.

the shit is getting tricky........look what AUD did today, and the RBA Quarterly Monetary Policy Stmt upped 2011 estimate for GDP from 3.75% to 4.25% overiding ec devastation of the natural disaster QL floods.

One thing the Bernanke said that jumped out was the reference to the dire consequences of burgeoning US debt.

And?

 

Fri, 02/04/2011 - 08:32 | 934160 Orly
Orly's picture

Just got another sell signal on GBPUSD and I don't think they are going to usurp it this time.

Ever notice when you get a sell signal, the thing jumps off the line like an alley-cat after a field mouse?  Can't even correct.  In fact, pop it to the stratosphere.  Well, they didn't do that this time. I think they have completed this two-year pump of the GBP- for the Queen's sake, of course.

Sell the hell out of it.  Eventually, it settles at ~1.21.

:D

Thu, 02/03/2011 - 23:58 | 933722 chump666
chump666's picture

We are looking at the S&P RMBS credit report for Australia, they got prime defaults forecasted for 2011. Aust bonds down last week or so,

Bet against Australia, 2 major natural disasters, a housing bubble and a mining sector that could slow hard on China.  RBA are dreaming.

Fri, 02/04/2011 - 00:30 | 933790 RoRoTrader
RoRoTrader's picture

It all sounds like it makes sense until the central banks keep pulling the dog's chain.

FEDecBbOeBoJpbOcBOcRBNZrBA

btw.......saying it is 1 thing, Calling it at aprice is another. What is your price to short?.......and, feel free to throw in some position sizing.

Thu, 02/03/2011 - 22:42 | 933536 vainamoinen
vainamoinen's picture

sellstop said:

"Bernanke is playing chicken with Asia". I agree - but The Bernank works for somebody - - -

Starving/rioting people don't put up much of a fight when it comes to war and domination.

So those uppity ChiComs and their 1.3 billion "cheeple" think their gonna run this world? I don't think so. They been runnin' "the debt con" for what, almost 2 or 3 decades now. The Anglo banking cartel has been at it for how many centuries?

What we are witnessing is economic warfare for keeps. We're just turning the heat up in Asia and the MidEast so things start to boil a little. Let 'em roast a while and see if that doesn't take some of the starch out of 'em.

The tell is: USA - 10% on food; developing world 40% on food.

It's pretty obvious who's gonna win this one - - -

Fri, 02/04/2011 - 01:56 | 933925 dalkrin
dalkrin's picture

Ah, my liberal ego is awash in a sinfully luscious compote of chauvinist posturing.  Long live the West, and all who sustain it.  Those myriad Chinese are all unique individuals living their lives, yet when taken as a single entity we must have no mercy in maintaining dominance in the eternal struggle for hegemony. 

Thu, 02/03/2011 - 23:47 | 933707 Buzz Wired
Buzz Wired's picture

I agree this is likely their intent, but the Bernank is playing with a flamethrower (thinking it is only matches) which will torch the whole system.

Thu, 02/03/2011 - 23:24 | 933650 nscholten
nscholten's picture

That is exactly what is going on...

Thu, 02/03/2011 - 22:23 | 933478 b_thunder
b_thunder's picture

Bruce,

Thsi economy is different from 1970s.  Back then, the market was relatively free and the Fed was an importnant player, but nothing like it is now.

This market is no longer free, it's largely centrally managed.  The Fed and the US Governemnt are 2 predominant forces that are in play here. When the Fed's ablance sheet if 3X of what it was 3 years ago, when the stock market falls daily from 9:30 to 10:30, and rallies after the "heroin" (cash) injection administered by Brian Sack, when US Gov't for all intents and purposes is the mortgage market - whn things liek this exist, The Chairman doesn't need to understand the market sentiment.  The Fed IS the market.  The Fed's influence is so huge that everyhting else is marginalized.  The market crushed William Miller?  Well, this time it's different.  This Chairman wil not get crushed by some bond traders.  Not so quickly, anyway.  He will be crushed ONLY by the popular uprising which will happen after the currency crisis and collapse.

 

Fri, 02/04/2011 - 00:19 | 933772 thedrickster
thedrickster's picture

"He will be crushed ONLY by the popular uprising which will happen after the currency crisis and collapse."

Word, but you are giving the sheep too much credit. The chances of the real culprit being correctly identified by the frothing adolescents post collapse are virtually nil.

It will be the Fed's enemies that are scapegoated as the last vestiges of an open society crumble.

Fri, 02/04/2011 - 09:57 | 934412 b_thunder
b_thunder's picture

You are 100% correct.  The real Dr "Evil" Ben B. will not be specifically targeted.  But, when *it* hits the fan, the Fed will not be left standing, just like any other major institution

 

 

Thu, 02/03/2011 - 22:01 | 933411 chump666
chump666's picture

 Fed 'nut' Kocherlakota says not concered with runaway inflation, on the wires now!

This is getting out of hand!

Fri, 02/04/2011 - 00:22 | 933777 snowball777
snowball777's picture

Another clueless academic (apparently they grow em stupid at Northwestern):

http://www.marketwatch.com/story/kocherlakota-fed-didnt-cause-housing-bu...

http://www.reuters.com/article/2011/02/04/usa-fed-kocherlakota-idUSNLL3D...

They KNOW that QE won't create job one any time before the next election, but they're going to do it anyway, regardless of the ensuing stagflation. These fucking assclowns are the most powerful incompetents in America (and I'm including Dimon and Blankfein in that estimation).

 

Thu, 02/03/2011 - 21:59 | 933404 chump666
chump666's picture

It's all UST's, amazes me how distracted the share market is at the moment with QE printing glories.  Bond market is pricing inflation, and that idiot Bernanke can't see it....???

But, China comes off it's holiday and will awaken to a total FUBAR inflation trade going on, Banana's, rice, sugar, oil, wheat...

Force the US into interest rate squeeze, dump some (or a lot of) treasuries, either that they will force deflation upon themselves and sink their own property market.

Knock out some hedge funds going long commidities.

 

Thu, 02/03/2011 - 22:07 | 933385 jeff montanye
jeff montanye's picture

with the duration of the s&p about half a century, it should be a big show when the rising yields finally make themselves felt in equities.  we're up a quarter on the long bond since late august so far.  5.4% would be half (about what it took in '87, but that was a secular bull market and the equity market's duration was far shorter). 

Thu, 02/03/2011 - 21:47 | 933358 Everybodys All ...
Everybodys All American's picture

I fail to see how Bernanke keeps his job. Are the masses that ignorant when it comes to this dollar/bond destruction?

Fri, 02/04/2011 - 00:12 | 933758 snowball777
snowball777's picture

Do the masses get to vote on his (re)confirmation?

Thu, 02/03/2011 - 23:37 | 933687 RockyRacoon
RockyRacoon's picture

Why don't you ask a few of the fat-assed, toothless hicks in the checkout lane at your local Walmart.   Let us know the results of your survey.

Fri, 02/04/2011 - 06:00 | 934046 bigkahuna
bigkahuna's picture

LOL! The masses just want their cable tv, beer and smack. They do not know who the bernank is. You won't see a reaction from the masses until they start having a hard time getting their beer and smack.

Thu, 02/03/2011 - 21:29 | 933290 OptionsHedge
OptionsHedge's picture

Bought more leaps on TBT today.

Thu, 02/03/2011 - 22:10 | 933438 just_looking
just_looking's picture

I thought that levered ETF had significsnt tracking error over time (making leaps a poor choice)?  Wouldn't it be better to short calls on TLT?

Fri, 02/04/2011 - 00:11 | 933751 thedrickster
thedrickster's picture

Seriously, isn't that like buying double the Theta for the fun of it?

Then again if Vega is your game TBT leaps would seem to be the right table.

Thu, 02/03/2011 - 22:13 | 933444 Orly
Orly's picture

One or two years out on these instruments is just crazy to me.

Fri, 02/04/2011 - 00:11 | 933752 snowball777
snowball777's picture

He's got a crystal ball. Maybe two. Big ones.

Thu, 02/03/2011 - 21:32 | 933303 Orly
Orly's picture

Now that's hard-core, yo.

Thu, 02/03/2011 - 21:29 | 933289 57-71
57-71's picture

Is there any good market anywhere?

Thu, 02/03/2011 - 21:14 | 933247 ShiftCTRL
ShiftCTRL's picture

No more smoking outside of Times Square, parks or beaches. How much longer for this revolution to hit home? 

http://www.guardian.co.uk/world/2011/feb/03/new-york-smoking-ban-outdoors

Fri, 02/04/2011 - 03:13 | 933995 cranky-old-geezer
cranky-old-geezer's picture

This is OT, but here's a good legal question for everyone here:  Why doesn't NYC extend the smoking ban to all public areas in city limits?

If you know the answer to this question, the correct answer, you have a secret few people know, even most lawyers.

 

Fri, 02/04/2011 - 00:14 | 933762 thedrickster
thedrickster's picture

But its the will of the majority, the God Democracy has spoken, you did it to yourself serf...mumbling something about we the people...services...

Thu, 02/03/2011 - 21:56 | 933392 jeff montanye
jeff montanye's picture

the legalization of marijuana and the prohibition of tobacco will meet in manhattan.

Thu, 02/03/2011 - 21:02 | 933216 sellstop
sellstop's picture

Thanks Bruce, more fine writing.

IMHO, Bernanke is playing chicken with asia. Years of pleading to get China to abandon the currency peg came to nought. Now the Bernank, with the USD strapped to his back, is sounding to the depths of the ocean. Inflation for all. At the present time the Asian and emerging markets are the most vulnerable to inflation. It will hurt them more than us. I suppose he believes that when the world abandons their pegs the markets will rule once again. In the meantime we will endure stagflation while time is the equalizer.....

 

gh

Thu, 02/03/2011 - 20:55 | 933199 Rainman
Rainman's picture

Scariest part of this is that Ben and Timmay are Obeyme's chief finance guys....with Daley for a kicker. All the Great One knows about the machine is what the mechanics tell him. Recipe for a good fukkin, I say,...we smurfs the fukees.

Fri, 02/04/2011 - 03:13 | 933994 WaterWings
WaterWings's picture

Chumba would say this is "crotch sniffing" but hell yeah I'm glad to see ya around. 

Thu, 02/03/2011 - 23:21 | 933641 RoRoTrader
RoRoTrader's picture

You get my VOTE to write as a Contributor, Rainman.

Thu, 02/03/2011 - 20:46 | 933170 topcallingtroll
topcallingtroll's picture

The word according to rick santelli, father of the tea party and ranter extraordinaire........is this a bond back up? Yes. Is this the bond back up? No. I had student loans at 9% My first house had a 9.5% mortgage in 1995. Times were pretty good in 1995 for just about everyone. If this increase in yields goes slow enough we will be ok. Keep us posted.

Damn..kudlow just mentioned 2000 gold and cramer was spanking the gold monkey this morning. I may have to buy back in!

Fri, 02/04/2011 - 03:57 | 934010 10kby2k
10kby2k's picture

 

thats wasnt the gold monkey he was spanking

Thu, 02/03/2011 - 20:32 | 933133 Amish Hacker
Amish Hacker's picture

Thanks, Bruce. Your last photo is an excellent use of graphics to demonstrate cause and effect.

Thu, 02/03/2011 - 20:32 | 933121 Orly
Orly's picture

The 10-year note is essentially trading sideways and has been for several days.  If prices are dropping on the 30-year and remaining flat on the 10-year, doesn't that steepen the yield curve more and make it more profitable for banks than ever.

Isn't that his goal?  I can't imagine that the Fed hasn't taken into account the reaction of bond traders.  I would imagine that there is a threshhold beyond which the Fed wil call the ball on Treasury declines.  I'd give a dollar to know what that level is...

:D

Thu, 02/03/2011 - 20:54 | 933197 topcallingtroll
topcallingtroll's picture

Yes
Yes but not necessarily a goal just a milestone on this journey
Yes
Me too

Thu, 02/03/2011 - 20:22 | 933102 Orly
Orly's picture

I do hope you're not snowed in again, Bruce...

:D

Thu, 02/03/2011 - 21:30 | 933296 Bruce Krasting
Bruce Krasting's picture

Tues/Weds. it snows. Now 19. Everything is ice. More this weekend so they say. I'll take that one last one standing up. After that if another big one comes, I'll just burn the fucking place down....

Fri, 02/04/2011 - 03:11 | 933991 WaterWings
WaterWings's picture

Oh snap!

Bruce, your reporting is priceless. That you continue to churn actionable detail is astounding.

Merci. :-)   

Fri, 02/04/2011 - 02:14 | 933944 whatsinaname
whatsinaname's picture

Jeffrey Skillings son in news for the wrong reasons...

http://www.reuters.com/article/2011/02/03/us-enron-skilling-son-idUSTRE7129HO20110203

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