10 Year Treasury
The US stock market may be in shambles and the Mahwah Stock Exchange is offline for nearly 2 hours now, but that had no impact on demand for US paper, in fact moments ago the US Treasury just sold $21 billion in 10 Year paper without a single hitch. With a When Issued of 2.233%, the bond priced 0.8% through at 2.225% showing that when one can't buy anything else, one buys what one can, in this case 10 Year paper.
It’s the breakdown of jobs by age that really screams out. It is a known fact that people in the 45 to 54 age bracket are in their prime earning and spending years. In the last year the number of employed 45 to 54 year olds has DECLINED by 67,000. It DECLINED in May by 51,000. It has DECLINED by 187,000 since February. It is a known fact that people over 55 dramatically reduce their spending as they approach and enter their retirement years. The Boomers have added 824,000 jobs in the last year, or 28% of all the new jobs added.
The world’s financial system is saturated with speculations fostered by nearly two-decades of central bank credit inflation. Just since 2006, the footings of central bank balance sheets have expanded from $6 trillion to upwards of $22 trillion. That’s all combustible monetary fuel that cannot be recalled; it can only be liquidated in the course of a monumental meltdown in the casino. So, yes, after the carnage of the past few days the global sovereign bond index has lost $625 billion since the bond bubble peak in late March. Call that spring training.
It is almost too coincidental to be a coincidence: on the day Ben Bernanke, who until a year ago was the biggest fixed income portfolio manager in the world courtesy of the Fed's $4.5 trillion in assets, joins Citadel as an advisor, the massively levered "market-neutral" hedge fund which as we showed earlier has $176 billion in regulatory assets, "loses" its global head of fixed income, senior managing director Derek Kaufman. Well not exactly loses. The reason for his "voluntary" departure: according to Bloomberg Kaufman is leaving Citadel not because he is about to be replaced by the former Fed chairman but because last year he lost $1 billion "in a variety of trades."
Is this the end of the last great run for the U.S. stock market? Are we witnessing classic “peaking behavior” that is similar to what occurred just before other major stock market crashes?
"Neither Central Bankers Nor Market Participants Can Extract Any Information From Current Bond Valuations"Submitted by Tyler Durden on 03/11/2015 09:46 -0400
All is not what it seems. Markets are upside down. Some ‘risk?free’ assets can be purchased for a guaranteed loss. EU asset markets (ex?Greece) are soaring at the same time that EU disunity is rising. An interest rate hike by the Fed is likely to cause a rally in Treasury bonds and a steep correction in US equities.
The stock market continues to flirt with new record highs, but the signs that we could be on the precipice of the next major financial crisis continue to mount. There are multiple warning signs that have popped up repeatedly just prior to previous financial crashes, and many of those same warning signs are now appearing once again.
The major unintended consequence of government and central bank intervention since Volcker's stand against inflation has been to generate its nemesis; deflation. With interest rates near zero in the major economies, there is nowhere for rates intervention to go to provide a stimulus. Strangely the answer must be higher interest rates. We will then see some "creative destruction" which is what the financial system needs to reset and start a proper economic cycle, but with the investment banks, who stand to lose the most, controlling the strings (just how do you think the US Budget bill got changed to allow banks’ derivative positions to be included in subsidiaries covered by FDIC insurance? ie the taxpayer covers their losses) we need stronger hands at the tiller than a coalition of "politicians" or a lame duck president. We need somebody with balls... any volunteers?
For all those who are long the USD and short the 10Y, good luck because everyone else is too...
The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. But now, the year of consequences may have finally arrived.
It’s not about the current Dollar & Treasury market safe haven bid, it’s about tomorrow’s confidence in our monetary system.
Maybe overzealous bond investors might want to rethink that Yield Chasing Strategy for 2015.
Olivia Newton John had it right................
The difference between 2007 and today is back then these were largely sub-prime loans and overvalued real estate mortgages, vs, today's entire global bond market bubbles from Spain and Greece to the United States.
On Tuesday, the Dow fell 272 points. No big deal, of course - we rebounded the most in 3 years yesterday. But what if it continued? Just six years ago it fell 51%. It could easily do so again – back down to, say, 8,000. There would be nothing unusual about it. 50% corrections are normal. You know what would happen, don’t you? Ever since the "Black Monday" stock market crash in 1987 it has been standard procedure for the Fed to react quickly. But what if Yellen & Co. got out the party favors... set up the booze on the counter... laid out some dishes with pretzels and olives... and nobody came? What if the stock market stayed down for 30 years, as it has in Japan?