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10Y Treauries Hit 2.50% - Highest Since Debt Ceiling Crisis
While the headlines will note the 2.50% level's importance, it is the belly (5Y and 7Y) that is being crushed.
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DOH!
Paging Dr. Bernanke! Paging Dr. Bernanke!
Fonz called it. Let the kabuki theatre begin!
Is Bernocchio choosing inflation instead of default?
Of course, he can fix it all in under 15 mins......
<--Bernank - after shooting multi-trillion USD wad - lost control of yield curve
<--Bernank is at risk of losing control of yield curve (& has turned printer dial to 11)
At some point, fed buying will chase yields higher and Fed selling will expose the bankrupcy of the US.
The exact same thing happend in the Asian financial crisis.
As foreign investors attempted to withdraw their money, the exchange market was flooded with the currencies of the crisis countries, putting depreciative pressure on their exchange rates. To prevent currency values collapsing, these countries' governments raised domestic interest rates to exceedingly high levels (to help diminish flight of capital by making lending more attractive to investors) and to intervene in the exchange market, buying up any excess domestic currency at the fixed exchange rate with foreign reserves. (Indonesia had foreign exchange reserves of more than $20 billion)
Neither of these policy responses could be sustained for long. Very high interest rates, which can be extremely damaging to an economy that is healthy, wreaked further havoc on economies in an already fragile state, while the central banks were hemorrhaging foreign reserves, of which they had finite amounts. When it became clear that the tide of capital fleeing these countries was not to be stopped, the authorities ceased defending their fixed exchange rates and allowed their currencies to float. The resulting depreciated value of those currencies meant that foreign currency-denominated liabilities grew substantially in domestic currency terms, causing more bankruptcies and further deepening the crisis.
I guess one thing in our favor is that we don't have much in the way of foreign denominated notes due.
Gosh, now I'm confused. If the economy is doing as well as they say, why do we need to "entice" to buy T-bills with a higher interest rate?
Good thing I always keep 33% of my assets in US dollars. My portfolio consists of what I call the Iron Trifecta: One third US bonds, one third US equities and one third US dollars. No matter what happens, my portfolio is hedged, allowing me to invest confidently within these asset classes.
So you're the little piggy who built his house out of straw?
Good luck when the Big Bad Wolf comes knockin'.
*I up-voted you for the true humor/witty sarcasm.
I'm planning to hold my treasuries to maturity anyway, so why should I care about falling bond prices?
I don't know
maybe because your treasuries are earning 0.2% while inflation is 6%?
you must have just bought a house to suffe through such high inflation...
.....so, raise the interest rate so inflation appears lower. It worked with education. When kids weren't meeting the "standard", we lowered the standard.
And with rising real world interest rates coupled with the real rate of inflation, you'll be on E-Z street on redemption day.
*p.s. - Nasdaq is first to bleed in the lead when the Bear draws a bead (on).
You shouldn't. Thats what idiots do.
Are you holding your US dollars to maturity too?
"Challenger go at throttle up"
Sorry, man, but all three of those are "US Dollars".
Poor, sad Bullard. I almost feel pity for him and his empty, hollow words and attempt at attention whoring.
Visual Representation of Effect of Bullard's Words
Your always spot on, TIS. Great photo.
Bullard wants to replace Bernanke. He wants Wall Street to know that if he does replace Bernanke he will continue with QE to keep the markets happy and rolling in abundant cash and credit. Wall Street rejoices and sees a savior in Bullard. Meanwhile in the rest of the world, people are shocked that anyone on the FOMC would openly admit that the fundamentals of the US economy are in fact bad, just as suspected.
Bullish! (I mean... MOAR desperate Bullshit. Pick your poison, Bernank)
06-21 12:48: Market talk that Fed sources say should delay tapering if worse financial conditions hurt the economy - Unconfirmed
Market talk that Fed sources say should delay tapering if worse financial conditions hurt the economy - Unconfirmed
*'Market talk' - Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.
Reaction details:
- In an immediate reaction emini S&P 500 has seen a 5 point higher in a move from 1575.50 to 1580.50. The USD index has seen a 0.08% move lower from 82.49 to 82.42.
- 16:53 Fed watcher Hilsenrath says markets might be misreading the Fed's messages and overlooked dovish signals in Bernankes Press conference
Our very own 'Baghdad Bob' for the Fed makes his appearance to save the day. I wonder exactly how much the Fed pays him and is it in cash or kind?
Got an email from GoldMoney this morning that explains the effect of rising interest rates in a much easier to understand way than what I've been attempting to explain so far:
Systemic risk should not be treated lightly. There are two worries for Mr Bernanke that explain his indecisiveness: firstly, falling equity prices undermine consumer and business confidence (at least in the central bankers’ playbook); and secondly rising interest rates along the yield curve are bad for bank solvency.
This latter point needs more explanation. During the Libor scandal, it became apparent that a small interest rate fall boosted derivative values significantly. Citigroup helped us quantify the effect when in 2009 it reported that a 1% fall in interest rates would enhance its derivative values by nearly $2bn a quarter. Citigroup is one of the smaller players in the derivatives market, with only $14.2 trillion of interest rate swaps at the time. This explains why zero interest rates were a necessary component of the rescue package at the time of the Lehman failure.
According to the Bank for International Settlements, last December there were $370 trillion of interest rate swaps. Using the Citigroup numbers as a guide, a 1% rise in interest rates would cost the banking system over $200bn in a year. Bear in mind that this cost is concentrated in a few too-bid-to-fail banks, and this is only part of the total derivative market, which amounted to $633 trillion. The reality of tapering is that the Fed is going to have to tell Congress that their interest bill is going to rise, so they better cut their spending, and that he is going to have to find an extra one or two trillion to give to the banks.
Instead, the reality is there is no going back from QE, and current instability in financial markets is probably only the beginning of an acknowledgement of this dilemma. The trade-off is between escalating systemic risk and being locked into further monetary inflation, either of which justifies protection by owning precious metals.
This article dovetails nicely regarding just how fragile US banks actually are:
http://www.bloomberg.com/news/2013-06-21/u-s-weighs-doubling-leverage-standard-for-biggest-banks.html
"Among the biggest U.S. banks, only San Francisco-basedWells Fargo & Co. (WFC) would exceed the 6 percent threshold being considered, with a 7.3 percent ratio estimated by KBW in a report this week. Morgan Stanley (MS) would be the worst, with 3.8 percent. JPMorgan (JPM) and Citigroup Inc. (C) would be at 4.5 percent, Goldman Sachs Group Inc. at 4.6 percent and Charlotte, North Carolina-based Bank of America Corp. at 5.1 percent."
The printer dial goes to 11? I guess even the fed sometimes needs "that extra push over the cliff.. ya know"
TIS: Agreed. Bernank appears to have "Lost control of the yield curve".
Did you see the Hilenrath comment today "Mr. Bernanke suggested the Fed could keep short-term interest rates near zero even longer than previously planned."
Even though the FED now (mis)reports losses as being "deferred Assets" (LoL)... the increase over the past few days in "deferred assets" has to have stunned the Bernank. Gulp!
oh-oh...somebody is loosing control over the 10 yrs treasury....not looking good Bernankestain!
also, who is selling all the silver? THE US MINT!LOL
http://zysites.com/silververitas/
irrelevant
Sorry, Dr. Bernanke has left the building. Let me introduce you to your new physician, Dr. Copper.
Fonz nailed it.... this is gonna get fugl (ier)...........................
Moving my target on EDZ to 85.....
Watch house prices/sales plunge accordingly.
I can hardly wait to see that chart!
*nomnom*?
Pink slips are flying at mortgage lenders today!
The cash crunch pandemic is here!
TBF being very very good to me...
It is a bit puzzling. It's almost like the markets are out of sync or something.
....a strange disturbance in the force....like a million voices screaming out at once....
George Lucas is poop.
Yes, since 2009.
The historical correlation between stocks and bonds is gone.
It is puzzling, but I attribute it to a sudden realization as to how strong the economy is.
We've reached another permanently high plateau.
Strong like BULL! (shit)
The chairman said the same.
Nominate the man for Nobel prize economics and then let's see if Turbo Timmy can do better!
Shit you get 25 greenies for that and I get a bunch of poo throwers who can't take my sarcasm anymore?
NY Fed is lending $20 billion/day of treasuries to primary dealers every day for the last 3 months - typical amounts used in times of serious crisis. The "supposed" purpose is to fill collateral holes in the repo market.
Or...banks are re-lending these securities on an overnight basis to hedge funds (sic...Bridgwater...sic) who in turn short the same treasury bonds. Every day.
If true, in short, it would amount to a manipulation scheme between the NY Fed, primary dealers and hedge funds to try to push interest rates in the direction their bets are on and to close out on the "safe haven" trade.
Theories aside, why should the NY Fed lend treasuries to the largest banks at these incredible levels when treasuries are taking a beating and players should be forced to buy collateral in the market place? If they don't have to buy the collateral on the market, you eliminate a huge chunk of the buying that would normally take place.
Well, if you assume that the Fed operates in the best interests of the Primary Dealers, rather than the best interests of the US Treasury, then it makes more sense.
Well said.
In Japan and in Switzerland (and most places) they try to protect their currency and their interest rates market from speculation.
Here, above all they try to protect the banks who owns them.
Foot meet Shoot.
We are fucked. We've been Bernanke'd. Enjoy the relative calm of the next few days. After that, all bets off. Grab a decent steak, beer or stronger. Enjoy the sunset. Forget about everything for a few hours. The singularity is now in full control and will be ripping your molar roots out before you know it. But until then ... take your rest.
I also want to point out that most of you fucktards blew me off back in March when Abe changed BOJ into a MiniMe-Bernanke machine. Well, well, well ... so the end of the world IS upon us, you toothless goons. All of this would not have happened if Japan had continued on its course of slowly eating its own corpse. After the 500 quadrillion Yen pledge to "adjust" the value of the Yen and the subsequent protestaions for 2 months by China, now we have China's financial system vaporizing in a pink mist of atomized flesh, bone and blood. The fucking US 10 year just took on 30 bips in 36 hours, look at the slope, far more to go there. State Street (and others) starting to seize up like a cheap lawn mower without oil...give me a green arrow if you get it and know that next week and beyond is indeed no longer Kansas as we have known it.
There's that word again...puzzling. :)
curious george wont be happy about that, the drone and super computer payment is almost due
Love It! Curious George !!! HAHAHAHAHA
It always makes me laugh
Well, i guess the ARM holders will be easy to identify, since they will all have an ARM hanging out of their ass...
Taper!!
LOL!!
I actually do have an ARM, and mine just adjusted. Currently, I have a better rate than the government.
pods
I have a 15 year ARM, I can ride this for awhile.
Better fire up the helicopter http://tinyurl.com/mem7o7x
On a POMO day too.
n/m
Collapse imminent.
Careful what you wish for....
http://nipponmarketblog.wordpress.com/
I don't wish for collapse. I wish for hangings.
Be careful what you wish for.
But guillotines are so much more fun.
A little dated, but a classic, and still relevant. http://www.amazon.com/Silver-Profits-Century-Theodore-Butler/dp/B000XKZO...
Hey Fonz...they hit 2.50% this week. 2.75%-2.90% next week? My bet is C and BAC have their rate term structure all messed up and at big risk here. Who doesn't have their hedges on right??
I can feel the margin squeeze now!!!!
That's ok, don't you think? I'm sure all the algo trades are programmed to BTFD at 2.5%. Nobody would trigger selling of such a high quality asset at a threshold like that, not when the 'asset' is backed by the FULL FAITH AND CREDIT of the US Government...
What does this mean? :(
I read Zero Hedge but I'm still not smart enough to be a millionaire. Oh well, I'm still not bitching about my fake "losses" in the box of silver at the bottom of Monterey Bay, despite my blue collar wage.
Rising yields mean that bond prices are down = selling pressure.
When investors get out of bonds, it's game over. It's the last domino to fall, as stocks are being completely manipulated since 2009. Bonds too, but being a larger market, can mean that the FED is losing control.
Also, rising yields mean larger interest payments. That makes the fiscal deficit even larger.
Summarizing: the system is fuc***.
Oh, just say it. THE SYSTEM IS FUCKED.
If this is indeed the end, I did not time things correctly. Que sera, sera. It is only funny money anyway. Peace out my brothers.
Emergency Hilsenrath blog post on Friday afternoon - 'Fed was only kidding about tapering'.
And there it is....
http://www.zerohedge.com/node/475533
Could be an ugly afternoon... free fall without any clear support below qqq, spy, dow, tlt (et. all)
I certainly hope there are no technicals used in the bond market..
The clapping is getting louder.
...and so are the voices outside the windows.
What does it do to the Fed's balance sheet? How much has the Fed lost on its holdings of treasuries - must be at least $100 billion so far. What does it do to the budget deficit since interest costs are higher. How much does the deficit increase by every year? $100 billion or $200 billion? Enquiring minds want to know.
Meanwhile unfunded liabilties continue to grow at $7 trillion a year.
http://www.usdebtclock.org/
And how about the insane leverage on it all too? 20% leverage + 5% drop = 0.
You buy that motherfuckin' dip goddamnit! You understand me? BUY THAT FUCKIN DIP NOW!
And Curious George Goes To Germany is on the telly...
I'm sure his trip was planned long ago and this is just coincidence.
Bond (the real world) panic now making it impossible for Bernank to pump the fraud illusion equity indexes....this is getting real interesting!
COME ON YOU MOTHER OF A MARKET... Give us what we've been waiting for!! RED across the board on all monitors, torch those sheep that are invested in stocks and bonds and destroy everything in your path...
AGSDASDFGDFGFDGF
Must.....BTFD.....EZ monies....guaranteed.....4eva......arrrgghhhhhhh
It's over, it is over
Coming up:
- dow cratering
- crude oil cratering
Nothing is over, they can double down, they can ban short selling, they can do whatever they want...
If it's "over", define "over" and/or the event timeline.
Double or tripple lehman coming
Exact Timing belongs to God, not humans.
People still don't get it....the salad days are over.
All preplanned, all intentional
Do any of you use data and facts? Or is it always opinion?
All opinions based on extensive reading of everything
Where do I find those facts? Impossible.
Just bits and pieces what is available online which makes me put a structure together
You, sir, hugely underestimate the power of governments over illusory things like money.
If they don't like the closing prices tonight, they can decree them to be whatever they want at the open Monday, and make it illegal for any transactions to take place at a lower price for the next 3 weeks. And Congress would agree, if their constituents had lost a lot of money.
Nothing is "over" until oil decides it is, and not its price, its availability. It's the only thing that can't be printed.
Setting a "minimum price" would accomplish nothing except sieze up the markets and cause widespread panic as people are unable to convert their stocks into spending money.
Like a bank holiday in the equity markets.
The government would then impose a minimum trading volume requirement on major firms. They WILL trade at those prices or be fined.
The point is . . . there was no money in the garden of eden. It's illusory. There is nothing sacred or defined-in-physics about it. It was invented. It can be changed.
Numbers on a screen will not be allowed to destroy civilization.
Oil will do that soon, but numbers from an invented, illusory entity? Nope.
I agree 1000%
It's about oil availability, not price.
Howvever, the Fed has created a lot more claims on that crude oil, that it is not making it into the economy but going to storage, hence economy is starving for energy
You two aren't talking about the same thing.
A national financial catastrophe, economic catastrophe, collapse of the government, etc., has happened plenty of times in modern and ancient history, it's one of the things we know has happened to every agricultural civilization ever. And generally, they rebuild. It might take a long time, but they do. As far as the civilization is concerned, it's not an extinction-level event.
Peak oil, or just peak cheap abundant energy, is and always has been a civilizational extinction-level event.
A Lehman 2.0, or something like it, could easily trigger a full-blown depression or possibly a collapse. But as long as the energy (and raw materials) are there, things can be rebuilt in time.
Most of the ZH crowd is waiting impatiently for such an event, for many different reasons of varying prudence and justification. I'm not sure anyone but LawsOfPhysics is eagerly awaiting a global catastrophic collapse due to energy supply contraction, as (as you undoubtedly know) such an event will not something most people will live long enough to tell their grandkids about.
So you won't state any data to support your theories? Why do you even write here? Just to watch your words appear on a page? You think we all care what you think?
It's for free to post on zerohedge and exchange thoughts and learn from everybody
Just ignore me, Nobody forces you to read what I say.
I, for one, enjoy reading your posts and often seek them out, EKM. I look for posters who challenge me to pay attention and seek my own information. You and several others are valuable to readers like myself. So, thanks.
Humbled. Thx a lot
Well now, isn't your screen name an appropriate one. You obvioulsy care what he thinks since you released your troll juice all over his post. Douche.
Tinfoil hat strapped firmly on here.
Ekm,
Not God mate, there is one lot higher than that. This ends when the Rothchilds say it does not before.
The worlds only Trillionaire family.
Tinfoilhat removed and safely stored.
;-)
Nope. No God. Just humans doing what humans do best.
Destroying humanity.
9/11 times a thousand!!!!!!!!!!!!!!!! Oh the hyperbole! This is an orchestrated cool down of the markets. It was becoming too obvious. The marionettes never get control. The puppet master always pulls the strings. So keep buying gold and silver. It's like religion. It's makes helpless people feel better about being helpless.
Yep. It's gonna be a cruel summer.
You called it. Kudos.
Two main issues:
1) crude oil price about $90 for two years=economy starving for energy
2) Currency swaps between France, UK, Australia, New zealand and ..........CHINA = allies avoiding the dollar = SUPER DISASTER.
Basically we've been OK for a while....the barkeep was willing to let the drunkard run up a bit of a bar tab but his drunken bully antics have worn out his welcome and there's no more pints with the promise to pay later.
i believe crude oil will be less affordable to americans, not more. vehicle miles driven are dropping, and rightly so. the americans are not getting wealthier and deserve less and less to drive those cars. obama can give executive orders but he cannot change the trend, it is not possible as long as the policies stay the same.
Not yet, Ekm. There are so many ways for this market to be manipulated. I think your conclusions are right, but I do think your timing is way off.
I'm beginning to suspect that Angelina Jolie's tits were the last effective distraction.
Rumor is that even after the surgery the faint scent of Billy Bob remains.
He has a ranch not too far from me, he's a big a-hole.
Doesn't matter, congress still believes there's no bond market crisis.
Clowngress....the most corrupt and myopic among us ALL they care about is their kickback checks.
Unfortunately, these are probably still well within the "free money" range re the Big Fucking Banks. ("BFB")
Imminent collapse is now upon us folks.
Dead men walking methinks.
:-)
I see you're new to Calvinball.
Slow learner GM.
;-)
+10 C&H reference.
good thing the nice men on CNBS say higher rates will have no effects on the stock market
NAH! Panic rise in UST rates mean NOTHING to our beloved holy stawks! We got da BERNANK, our Messiah we're down on our knees sir!
Let's Ride the Bomb! Calling Major Kong. http://youtu.be/JlSQAZEp3PA
CME margin hikes on interest rate complex... did the trick..
Bullish!! (Didn't look like anyone had hit that yet."
Also, gold biatchez.
The Treasury's hope of refininancing T-Bills and shorter term T-Notes at super low rates in 10 to 30 year Bonds (>2%) is slipping through their fingers.
Anyone see any falling banksters yet?
The Wall Street Triple Lindy.
It ain't over till the Fat Cat Splats.
Yet we are not rotating out of bonds, right guys?
Come babe, come babe, puke me up some of those 2.6 ten years.
https://fbcdn-sphotos-d-a.akamaihd.net/hphotos-ak-prn1/p480x480/1013080_...
https://fbcdn-sphotos-d-a.akamaihd.net/hphotos-ak-prn1/p480x480/1013080_10151452160451039_460310151_n.jpg
What counts as an inverted yield curve in a ZIRP environment?
Ben needs to go back to the chalkboard.. this isn't going as planned. I have a feeling it's going to be an uugly afternoon session.
It's been ugly for me because I'm short and rooting for a crash
They´ll almost certainly test 200-Day MAs, 1500 in the S&P and 14000 Dow.
"By the pricking of my thumbs / Something wicked this way comes."
http://en.wikipedia.org/wiki/William_Shakespeare
To restore confidence, Ben needs to find a nice strong rope and a chair, go outside, find a tall tree with a strong branch, attach the rope to it, make a nice hangman's noose, get up on the chair, tie the rope around his neck, step off the chair... and nature will take it's course from there.
That was epic short squeeze... wow> Now back down.
Why is it called "getting crushed" when the interest rate goes up? I'd think people who are now buying would be happy!
Uh oh. You mean the gov't will need to pay more to fund itself? How will the IRS pay bonuses and the NSA pay for expensive consultants and the state department hire cronies if the costs of gov't borrowing go up? Maybe China's Communist Party will extend a "Friends of Mao-angelo" loan?
Pakistan cut its interest rate today, that must mean something, no? MOAR growth. I am sure Pakistan can offset all the low imports of US and Europe from China, all by itself? /sarc
http://www.businessweek.com/news/2013-06-21/pakistan-unexpectedly-cuts-r...
Hard to disassociate the politics of this,
Barry is anything but an effective pol- he has never had to actually compete nor govern as a shepherded political pawn- he is nothing more than a minor league bully with a major league truncheon.
One of the cardinal rules of cut throat politics is never toss someone under the bus that is still driving the bus- loose screws sink ships.
Ben only had to give it a shrug along with a mostly neutral set of minutes and a somewhat blank look to show Barry who really is in charge, after all the Fed doesn't really answer to Ahl kida D.C.
The hammer of destruction to our economy doesn't want to be blamed directly for a pile of ashes he created, his plan is like every other self absorbed academic is for the next fool to deal with the issue.
it's going down hard eventually but who really knows when?- we still have the Nikkei as a buffer wot?
a blip: http://research.stlouisfed.org/fred2/series/DGS10/