Long Bond Futures Down

Tyler Durden's picture

Wait, what is this? Selling in both ES and bonds? Surely you jest: after all money just goes from one to the other right? Guess not.

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Gubbmint Cheese's picture

this is bullish for equities...



knukles's picture

Fellers, lets not forget a small reality that seems no-body's addressed, as of yet.

But it will be bigger than a shrug.

Many state and local deposit accounts at commercial banks Must By Law be secured/collateralized with AAA rated paper.  Some guidelines simply say AAA, some direct obligations of the US Treasury and it's federally chartered agencies...yadda, etc, adhoc, vootie, BurmaShave...

But, many do say just plain and simple, AAA

Now, lemme see here.  If Treasury goes to less than AAA, so to does every other piece of paper guaranteed by Treasury/US gubamint.  GNMA. AAA gone.....you get the picture.

Money Market Mutual Funds.  Similar plights of antsy in some circumstances, depending upon the way the guidelines are written.

Repo collateral..... see investment guidelines, and what about overcollateralization levels?

NAIC reg bounded insurance companies.  There go the capital haircuts!
Oppppps same with the banks, eh?

So, aside from the political side-shows, there are indeed some real and salient ramifications with respect to simply, a downgrade, even if there is no payment lapse.
And that's possible my little reptilian friends, for the AAA designation assumes payment in full on a timely basis.  The difference between AAA and AA, for example is predicated upon the Probability/Possibility of a deferral/missed payment.

Groan away, folks.  If the downgrades happen, there'll be some market disturbances, mostly unseen to the common folk, but a shift in the composition of the playing field, including increased market segmentation....

Bastiat's picture

You got it--but I disagree that they will be "mostly unseen" disturbances.  It would be catastrophic.  There is no place for that money to go: literally. 

DoChenRollingBearing's picture

Bastiat!  You surprised me!

It could go to physical gold.  Then we head to $55,000...

Harlequin001's picture

It will go to cash first, these institutions can't exist if everyone is invested in gold. They can't make a margin...

A.W.E.S.O.M.-O 4000's picture

You know, things of value that can be easily traded.


Like cigarettes, razor blades, a metal spoon that can be sharpened into a shank, stuff like that.

Harlequin001's picture

That's what individuals will do, but not institutions currently invested in money market funds...

Harlequin001's picture

Gold is the death Nell for these institutions; they cannot afford to have everyone run to gold. As such I think they would prefer to leave it in bank deposits rather than invest it wisely in gold for their clients...

jm's picture

This is all very true, which is why an actual downgrade is so unlikely.

Then again, even if entities are mandated to collateralize with AAA paper, there is effectively none if the US goes, unless everyone wants to scramble for Bunds and such which just isn't feasible.  So people will just continue going through the motions until the house burns down around them.


Harlequin001's picture

They will simply change the funds' mandate....

Urban Redneck's picture

An alarming number of people seem to want to continue going through the motions of mindlessly scrambling into CHF, regardless of the European instability it causes or the fact that by way of relative scale- it would be like cramming not just a dozen circus performers into a mini clown car, but rather the entire circus troupe and its zoo auxiliary (including the elephants).

bigwavedave's picture

funny... you think they wont change the rules?

Harlequin001's picture

ands that's what happens when you start at the top and work down commenting as you go. At least we can agree on a likely outcome...

CrankyOldCreditGuy's picture

No problem, I am going to put some UST/GNMA/FNMA  into a structured vehicle and tranche it up into several layers and get the agencies to rate the top layer AAA – presto a new levered market for gov’t bonds.

Yen Cross's picture

 No they won't Slewie. They have pegs to short term yields. Go rent a cool movie. it has nothing to do with numbers. It's called Less Than Zero.  If you have already seen it, see it again. {LEGALLY}  YEN...

JW n FL's picture

Gold Lift Off in 3 - 2 - 1... we have Lift! Off!!

DoChenRollingBearing's picture

Two more days and I am BACK in the USA buying more!

If there is any physical left...

RockyRacoon's picture

Watch the U. S. Mint commemorative products.  They can't raise prices like they can on the bullion products.   It takes time and you might catch a deal.

Check this out:


caerus's picture

damn this is fun

CrashisOptimistic's picture

Guess what, sports fans.  

Society cannot function with its alpha asset priced near or higher than $100.

The game is over.  

EHM's picture

Tradition bitchez!!

Mae Kadoodie's picture

And don't call me Shirley..

SMG's picture

Tyler = relevant, but funny too.

Cdad's picture

Ummm...don't we have an auction tomorrow?

Yen Cross's picture

  Good call cdad  ! Like a glove as always... Ya better run for cover , 2-5 auctions should be really interesting coming up. Yield curves and all.  13 week and 26 week on the chart.

HungrySeagull's picture

I cannot comment on this because I know nothing about it.

If it drives Gold and Silver up, then great! If not? heh.

RobotTrader's picture

All TPTB needs to do is throw in a couple of "Fear Curveballs" like another country is on the brink of default, and investors will once again dump foreign sovereigns and pile into U.S. Treasuries.

Meanwhile, gold continues to rocket up in foreign currencies as well, as each country is in a desperate race to the bottom of the tank.



camaro68ss's picture

Did someone hack robo traders account? he sounds normal

Harlequin001's picture

just playing both sides of the coin old stick...

Tyler Durden's picture
by RobotTrader
on Mon, 07/11/2011 - 22:47


Watch the yields on Uncle Gorilla notes plunge to
unheard of lows, while commodities of every stripe get poleaxed as
screaming scared investors pile into U.S. Dollars.

Infinite QE's picture

Classic. Still need a ten x inverse robot trader ETF!

AccreditedEYE's picture

LMAO! Ohhhh Robo... He did it to you!!! haha

RockyRacoon's picture

Is this why his ability to post pics of boobies has been revoked?

I'll miss them -- they were his most relevant comment.

SheepDog-One's picture

LOL! RoboTrader is down for the count! Poleaxed by Tyler!

kito's picture

robo, you sound soooo bearish

lieutenantjohnchard's picture

meanwhile, a stopped clock being right twice a day outperforms the contract 1099 processor and his predictions.

robottrader: the ultimate contrarian indicator.


SheepDog-One's picture

Momo just ultimate faded himself.

plongka10's picture

OT, but has the Moody's story been censored? Can't get anything but the headline when I click on the comments link?

janus's picture

yeah, this article was doing the same for me just moments ago...I'll go try moody's again

n00b tube's picture

This is bullish for LNKD, right?