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"Taper Off?" - US Treasuries Are Having Their Best Day In Almost 3 Months
After an almost non-stop decompression in yields post-NFP, Treasuries are ripping today on the back of dismal economic data. After testing up to the 2.00% Maginot Line for 10Y, today's 6.8bps yield drop is the largest since mid-February. Taper or no Taper, bonds 'want' to reflect the real economy it seems... of course, as Treasury yields surge to the lows of the day so stocks - in their inimitable manner - are pushing to new all-time highs...
10Y yield dropped its most since Feb...
as bonds appear to want to correct back to macro reality...
Charts: Bloomberg
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Take Off!
100% ponzi.
Stock pricing these days is what Keynesians describe as: "Escape velocity", it's the end point where the ocean turns to lemonade.
There is no organic growth. Without 700B of fiscal stimulus and 1T of monetary stimulus, can you just picture what GDP growth would be?
Q2 GDP projections are edging down to south of 1% -- that's WITH all that stimulus.
Why would yields rise? How can they as the world chokes?
Negative yields will be in the lexicon again soon. If you are in bonds, you'll make money.
Just another recession inside the overall depression. Someday we'll recover back up to turbo-charged mind-bending 2% growth rates..... but not this year. This is the year of "what the fuck? You mean it gets WORSE??"
European closed. Come on AMERICA
Print it Ben.......the only thing you can taper is in the bottom of your toilet
IF the Fed ever stopped QE, yields would drop through the floor - 1% 10Yr easily.
I agree ghostface. That is where we are heading.
Bullshit, If the central banks taper, there won't be a bid on anything paper, including treasuries. No bid, price drops, yields rise. Please, ask yourself what percentage of the 7+billion (and growing) people on the planet have liquid captial to "jump into treasuries and sovereign debt". Fucking laughable.
Laws yields will fall as what I said below happens. That will be the actual blow off top. At some point after that happens, reality sets in across the board, the U.S does not escape it, and yields begin to rise, the fed ends up with massive QE like you said...god knows...200 bil/mo? and inflation starts ripping us apart.
See my comment below, this is a complex system. All I kmow is that in order to actually deliver any thing real, you need real inputs, not paper fucking promises.
In effect, I am completely agreeing with you. I just think we have a temporary pocket of time where everyone goes running to the wrong place. At that time, behind the scenes, all things physical will be separating.
I certainly would not be investing money based on my short term thinking. At that point anyone with half a brain will be running as fast as they can the other way.
+1
If QE stops (Fed stops buying bonds) wouldn't prices drop and thus yields rise? What am I missing here?
You are missing two things (I think). The first is the crash in the equity markets. The second this is a soaring dollar against the rest of the currencies which are still devaluing. So amazingly, the US is seen as a safe haven. Money floods into treasuries as the depression sets in all over the world equity markets.
With that being said, if the Yen starts really blowing up....that will cause hedges to unwind all over, and a lot of those hedges would have to sell treasuries. So in that case, yields could rise.
If you think yields just rise because of the US debt/deficits being unsustainable, we are not there yet.
Pretty bold comment considering that many sheep are already sitting in treasuries either directly or via their retirement plans. I really don't know who or what entities would be able to mobilize captial if both equities and bonds tank. Interest on debt aside (which is a big deal), the bottom line is the ratio of paper claims versus real productive assets in the world. You tell me how that looks.
I am not talking about sheep, I am talking about every Large bank and hedge fund in the world, probably a lot of CB's as well.
"every Large bank and hedge fund in the world" - you remain focused on paper wealth. This is about power and control of real inputs, period.
See my comment above. I agree.
you guys are forgetting that we will need to sell more treasuries to fund increasing entitlements and the upcomming OBAMMA-CARE. more treasuries for sale + less FED asset purchase = crash in bond market IMHO
Plus, the marginal supply in USTs is relatively low. The JCB isn't going to stop printing, they never will, they are well past the point of no return, and they know it. It wouldn't take much "rotation" into Treasuries to drive down yields. Some of it would come from the MBS market. 2008 redux.
Exactly my scenario.
The Fed could stop QE and it would not matter.
The NY Stock Exchange could be nuked and it would not matter.
The HFT engines that determine prices don't care about that stuff. They care only about what their opponents do.
You guys need to GET OUT OF ALL OF THIS. Buy farmland. Hire a farmer. Grow calories. Sell them. Every fucking year, and if you buy in Brazil, more than once a year.
If you stop playing that game, you'll be sitting like a king in 10 years.
fed stops qe, so no POMO, so bids on treasurys would come from .. investors fleeing equities in search of zirp safe-haven?
are there any other safe havens that pay no interest?
anyone?
mister bueller?
anyone?
for starters every 401(k) participant will move every cent from their stock fund to their bond fund.
Someone mentioned the other day something like this:
There has never been in all history a central bank that embarked on quantitative easing that was ever able to stop it and reverse it.
correct, neither has a fiat currency ever been abandoned because of "deflation".
I've heard just about enough. I'm going to tank the market now:
This shit's NEVER going to end. We're going higher FOREVER. No failures will be allowed because the Fed's got our back. Good news is good news, bad news is good news. It's a win-win situation no matter how you look at it. It's not a bubble and who gives a crap even if it is? It's a bubble blown by the people who can print money endlessly to reinflate it. There is no downside here except not participating. No risk. No end in sight.
If you don't buy stawks now, you'll regret it when the Dow hits 36,000 next year.
If that doesn't do it, I'm outta ideas.
Oh, we'll crash again sooner or later. i guess sooner. The malinvestment that is going on now will crash the economy again, have no fear. I work in the mortgage industry and you would not believe the crazy ideas I hear daily. Here is my guess - some of these mortgage REITs will implode, which will cause the repo market to freeze up, and mbs spreads will blow out like crazy, freezing the mortgage refi market in its tracks, which in turn will crush bank earnings, lead to massive job losses in the mortgage industry, housing industry...
All thanks to the current reaching for yield that BB is fostering.
Here's an idea.
Stop participating.
If you live in a city, get out. Find some farmland. Find a farmer to farm it. THAT is where you put your money. In 10 years you won't care what bullshit exists in what economy. You'll have something to sell that people will aways want, food.
Who needs food when you have McDonalds? I prefer GMO stuff anyways - it looks better.
Big macs are still delicious. The only problem is they shrunk. Have you seen them lately?
Then sell your food to McDs. Potatoes!
There is no market anymore, but you'll see, there will be no free lunch in the end. However, you could starve before you'll see them eating each other. Just try to stay alive as long as you can to watch the walking dead. It'll be quite a show.
Must.....Buy....Moar....BAWNDS....
QE is not ending in my lifetime. I guarantee that.
Nah they won't actually announce 'end of QE', just 1 of these morning everyone will wake up to find their accounts Corzined.
When france's 50 year bond (gasp!) has the same yield as our 30 year bond you know some serious mispricing is going on.
Graph needs one more line - money printing. Then the stock market "gains" make sense.
My guess is the thing that makes this fall apart is the housing market once again. So far they have avoided a real banking crisis by allowing banks to borrow at 0% and carry mortgages and ABS etc on their books at whatever valuation they want. To make the market look attractive to the public they have used hedge funds to buy foreclosed homes using the rental story.
All smoke and mirrors.
China enslaved, corrupted, polluted itself for decades to amass a trillion in US debt. Ben did it by pressing a button on his computer.
I am off to Costco to buy some underpriced Chinese crap today. Party on!
Maybe Obama could pardon Madoff and make him the FED Chairman? He has experience!
Baby boomers with Bernanke's help are putting their children's and grandchildren's into abject poverty.
'there is a tropical-depression now coalescing in the 'torrid-zone' coagulating about-- it seems quite perplexing to say the least? being that the financial-waters are cooling off from the 'El`Nino`QE Oceanic fiat current[cey's]', rather than warming the financial atmosphere?'