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As Ten Year Sell Off Accelerates, The Bond World Is Flat
As the 10 Year continues to plunge, the one topic nobody on CNBC is daring to discuss is the absolute slaughter for all those calling for a steeper curve, and the resultant misery that banks are again experiencing as a result. With financials supposed to be the new market leaders one can't possibly bring up the sad truth that as QE2 fails, the US financial system will take the brunt of the hit. And even as Goldman and MS get their wish for a sell off in the 10 Year, unfortunately for them this is accompanied by a less than comparable dumping of the long-end, resulting in an even greater flattening of the curve, and validating our call from last night that the bond world is about to get a whole lot more flat. Lastly, as the 30 Year Cash Pay Mortgage jumps by 20 bps W/W, the result is about a $200 billion loss in home net worth in just one week. The Uberprinter is now torn whether QE3 should be one of monetizing municipals, or, as Bill Gross has been positioning so very well for the past two months, throw it all into MBS once again.
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2yr & 3mth Libor trying to invert for SO long was the tell
Please clarify how a rising 3mo LIBOR enabled you to foresee a dropping 10yr
Funding pressure pulling banks out of term risk?
I didn't say a rising 3mLibor.
And I admit I have been caught a bit off guard by speed & continuation in the move, no doubt. But the tell was there :)
aka 'All Your Capital Flows Are Belong to Us!'
Monetize the galaxy, Bernank!
The Bernank's Take: http://www.youtube.com/watch?v=rSjK2Oqrgic
Denninger's take: http://market-ticker.org/akcs-www?post=174358
(Right on the money, IMHO)
First class rant
throw it all into MBS once again
Throw all what??? Bens just about doing the full monty as is...perhaps Ben should attempt to throw in the towel instead?
This seems like the reality check I've been hoping for. It will take a significant trend set up to penetrate the bullshit screen in MSM. Didn't hear boo about it anywhere else yet.
The Bearded Clam Bernank's lips are quivering again.
The bagholders must be having trouble squaring
"Rates will be low for an extended period"
with
"We can raise rates in 15 minutes"
Our rates are securely very low for the foreseeable future...well until suddenly they shoot up in minutes. Doesnt lend much confidence to park your big bucks with the FEDs.
Didn't someone (GS?) sell 50 year bonds a couple of weeks ago? Or was it 100 year (unless that was the TD joke).
Regardless, what we are seeing in tandem is that the long in long term is no longer the long we knew just recently.
The long and short of it is that now, short is the new long. I'm sure you are with me.
There is no risk appetite for the new long, shorter than the old long. What then of Gobbermint long? Far from appetite, upchucks come to mind.
But they will save the bond market before the stock market. I think we'll see a sharp correction this Friday.
Funny, bonds started as long term investment vehicles. This is just more sign of th etimes.
ORI
http://aadivaahan.wordpress.com/2010/06/09/capital-and-other-isms/
EUR and AUD trying to recover.
PigMen are already front-running the ES futures.
Even crude oil is holding its own.
Buy the fucking dip!
....and, equity futures start their daily levitation act.
You know...why not.
Why? Because its all theyve got left.
I think this is spot on. In my experience, there is a large proportion of equity traders who don't really understand credit. They see rising bond yield and think this is a sign the economy is recovering/ inflationary and think this must be good for equities. I'm sure we'll see something about the decoupling concept in the next day or so, but if China raises rates this weekend, well it's going to ruin a lot of people's Christmas. I have been selling all long positions yesterday and today - it's been a good year, and I see no need to spoil it.
If I remember Rosie right, the average 10-30 spread historically is around 50 bps.
This bearish yield narrowing is the best market rxn possible, as it refutes Gentle Ben's argument that monetizing the debt lowers interest rates. At the same time, the relative stability of yields in the 11-30 year range (ie the point of the 10-30 spread measurement) suggests that the errors of the current Washingtonians have little to do with the policies etc. of the decades to come-- if indeed hyperinflation is avoided. In other words, hope for sanity springs eternal-- for the very long term.
200 billion you say?
Come back when it's over a trillion.
I ain't got time for small change talk!
Same shit, different day. We've seen this over and over again with equities and CNBS coverage.
An announcement is made, and they celebrate it short term--yesterday it was irrational exuberance throughout the market early in the day because the politicos reached a tax deal.
Then, some critical thinking is done about the long term impact--we're never going to get our fiscal house in order so the natural market forces take over as evidenced in bonds.
They can fight the tape all they want, but no government has ever exercised control over (centrally planned) market forces in the long term.
If these morons would just accept that fact, they could put this farce to end today, we could have some real pain for a short while, and the survivors would all be better off.
like watching reruns of "Days of our lives"
Not sure why the morons are that
bullish. O'bummers plan is slow
morphine drip, not an amphetamine.
Like the good doctor tells every dying patient:
"We will make you as comfortable as possible."
Obama's "plan" just guaranteed a QE3, 4, 5, 6, 7....666
whatever you buy, in the long run (3 months) you can't lose.
United States CDS may just be worth taking a look at.
There is far more at stake in the bond market than in equities. If the long end keeps getting hammered down, look for Ben and his Merrymen to sacrifice equities in order to scare people back into the "safe" bond market.
Although the entire curve is not really that flat, nonetheless, an overall flattening yeild curve is not the reaction one would expect given the free-money-for-all monetary and fiscal policy being pushed by all the clowns in power.
Yes the bond market trumps equities, however, its not exactly the level of the 10yr or the 2s10s spread which on CNBS every minute of the day, indicating at what level above 10,000 the markets are at.
J6P cares (relatively speaking) about the markets (read: Mr. Dow Jones) being up. Not any other, you know, more meaningful indicator.
Here's to a flattening, and to ZHs prediction of more pain for the Fed (but major win for any smart FI desk {hi MS, Barcap}).
Will Pimco front run
Brian Sack on the
30 year, or are we
going off the cliff.
Not even Bubbles
knows.
The fact about the S&P is that it has advanced about all it can on the back of the ridiculous bid in oil and other commodities. As well, the Black Friday pump has retailers so ridiculously over priced to the upside that they cannot contribute much more to any upside move, either. On top of that, the tech trade, which is really about a dozen now dot.com priced mo mo tech companies which have now brought the NASDAQ to the very edge of the cliff...which leaves...of course...
The Banks. The HFTs have now arrived at the point where they absolutely need the financials to move up...or this whole manufactured rally will, as we all have been saying, end badly.
And where are we this morning? FBI agents spreading out across the nation knocking on hedge fund doors. Fraudclosure. Bond auction failures and a flattening yield curve. Mortgages stacked up for liquidation and hanging in limbo.
This is why oil is rising right now...despite that there is no reason for it to be up. It is required to drive the OIH. And the more up it goes, the more damage it does. Here we are again, my brothers. Clearly, the housing bubble was the fuel for our greater depression...real estate always is. But let me remind you what the starter gun was that sent us down this long cosmic bunny hole...the criminal syndicate known as Wall Street taking oil to $150 per barrel...right before oil and everything else just simply collapsed.
We need perp walks. Lots of them. Capital will not form again as long as tthis nation's banking system is filled with miscreants, greed monkeys, slick talking used car salesmen that are criminal to the core. Sweep criminal Wall Street...and then we can start talking recovery.
excellent post. excellent.
Maxed out, dimishing returns now the harder they pump the worse it gets. I dont care if Bernanke announced QE4 of $5 trillion today, wouldnt make any difference.
Shocking! At 11:05 est...the financials lead all sectors in terms of percentage gain.
Who knew?
Oil goes up if oil production can not match demand.
Not consumption. Demand. Not supply. Production.
There are two parameters in the issue of production and demand. Demand is not the only one. And never forget that you don't even know what demand there is. Chinese long term contracts are off the radar screen.
There was a brief moment yesterday where bonds acted as a 'risk' asset. Yields were going up and stocks were going down. Almost the entire world is calling for a shift from bonds into stocks. A small part of the world is calling for bonds to do well and stocks to do less well. Almost no one is calling for, or set up for bonds AND stocks to do poorly! If people (China) are selling bonds and not buying equities, the pundits will be wrong and market is in horrible shape.
I think today will be a day we all will remember for a long time. Good luck to all.
I think today will be a day we all will remember for a long time. Good luck to all.
I think today will be a day we all will remember for a long time. Good luck to all.
You said that last Friday about this Monday. Well, it was a day to remember - new yearly high in all major indexes.
:D
sorry for 3x. later
Tyler, remember your post from about a year ago. To fund the deficit (at affordably low rates), the Fed might have to "sacrifice" the equity market.
It seems like Bernanke is faced with this dilemma....right now.
Yep Boston, but the people are trained monkeys, trained to believe that stocks are the be-all, conditioned to believe stock markets=economy. They cant have it both ways here.
Just remember. Equities are toast
if Ben loses control
of rates...and he's
losing.
Interesting. 10Y inflation-linkers also getting torched (107 a month ago, 103 now--ouch; yesterday was brutal for them) but US CDS at 5Y and 10Y is up less than half a bp. So it isn't inflation, and it isn't credit. What is it?
Guess those people saying there is no bond bubble were right...just a little prematurely....
I think the 10yr is right on 50 dma. 30yr already thru. Keep buying stocks everyone, it's ok.
Wholesale liquidation across all assets has begun...
I'm sure Wanger's liquidating a lot of consumer discretionary assets as we speak.
:D