Here is the only math you need to know as we all look at 2010: in 2009 US Dollar denominated fixed income supply, net of the Fed's Quantitative Easing operations, was $190 billion. In 2010 it will be $2,060 billion, an eleven fold increase. The Fed has three choices: 1) a QE 2 announcement soon, causing a plunge in already low Democrat popularity ahead of the mid-term elections; 2) interest rates skyrocketing, throwing the economy into a true tailspin; 3) the mother of all engineered equity crashes to return capital flow to risk-free assets. None of the three is a pleasant choice, however the Fed could only delay the inevitable hangover from the biggest private-to-public risk transfer in history for so long.
We have a lot of fresh Treasury supply coming in this week. The last 30-Y auction put an end to a series off auctions that were coming in better than expected. However, as we had warned before that last long bond auction, the expected yield below 4% had the potential to trigger some retaliation by real money investors. Sure enoguh the scenario played out and since then yield have backed up towards 4.30%. Also as pointed out last week 3.50% on the 10Y is a relatively key psychological level.
Brazil Joins Currency Intervention Brigade: To Tax Fixed Income, Stocks 2% To "Keep Real From Rising"Submitted by Tyler Durden on 10/19/2009 16:32 -0400
Developing story, but, surprisingly, not a dollar negative for once.
It has been confirmed that Chris Sullivan, (curiously still with a green light on his Bloomberg profile) is taking the Ironclad parked in the dodecatuple secret bottom basement of 32 Old Slip, and will sail the East River all the way up to Boston where he will be joining Fidelity as president of its bond fund. Sullivan is moving on up in the world, not just in a purely magnetic north sense, as at Fidelity he will oversee more than $170 billion in bond assets.