10Y Treauries Hit 2.50% - Highest Since Debt Ceiling Crisis

Tyler Durden's picture

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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ebworthen's picture


Paging Dr. Bernanke!  Paging Dr. Bernanke!

RSloane's picture

Fonz called it. Let the kabuki theatre begin!

nope-1004's picture

Is Bernocchio choosing inflation instead of default?

Of course, he can fix it all in under 15 mins......



TruthInSunshine's picture

<--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)

Spitzer's picture

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.

JeffB's picture

I guess one thing in our favor is that we don't have much in the way of foreign denominated notes due.


boogerbently's picture

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?

MillionDollarBonus_'s picture

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.

TruthInSunshine's picture

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.

MillionDollarBonus_'s picture

I'm planning to hold my treasuries to maturity anyway, so why should I care about falling bond prices?

TerminalDebt's picture

I don't know

maybe because your treasuries are earning 0.2% while inflation is 6%?


madbraz's picture

you must have just bought a house to suffe through such high inflation...

boogerbently's picture

.....so, raise the interest rate so inflation appears lower. It worked with education. When kids weren't meeting the "standard", we lowered the standard.

TruthInSunshine's picture

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).

bnbdnb's picture

You shouldn't. Thats what idiots do.

game theory's picture

Are you holding your US dollars to maturity too?

NoTTD's picture

Sorry, man, but all three of those are "US Dollars".

TruthInSunshine's picture

Poor, sad Bullard. I almost feel pity for him and his empty, hollow words and attempt at attention whoring.

06-21 11:45: Fed's Bullard says Fed may need to increase QE if inflation slows

Visual Representation of Effect of Bullard's Words

Handful of Dust's picture

Your always spot on, TIS. Great photo.

RSloane's picture

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.

TruthInSunshine's picture

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

RSloane's picture

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?

Panafrican Funktron Robot's picture

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.

Panafrican Funktron Robot's picture

This article dovetails nicely regarding just how fragile US banks actually are:


"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."


TheEdelman's picture

The printer dial goes to 11?  I guess even the fed sometimes needs "that extra push over the cliff.. ya know"

Muppet's picture

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!    

Silveramada's picture

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


tawdzilla's picture

Sorry, Dr. Bernanke has left the building.  Let me introduce you to your new physician, Dr. Copper. 

gatorengineer's picture

Fonz nailed it.... this is gonna get fugl (ier)...........................


Moving my target on EDZ to 85.....

Handful of Dust's picture

Watch house prices/sales plunge accordingly.


I can hardly wait to see that chart!

ghostfaceinvestah's picture

Pink slips are flying at mortgage lenders today!

Headbanger's picture

The cash crunch pandemic is here!

bullet's picture

TBF being very very good to me...

Dr. Engali's picture

It is a bit puzzling. It's almost like the markets are out of sync or something.

RSloane's picture

....a strange disturbance in the force....like a million voices screaming out at once....

TLT's picture

Yes, since 2009.

The historical correlation between stocks and bonds is gone.

Al Huxley's picture

It is puzzling, but I attribute it to a sudden realization as to how strong the economy is.

THX 1178's picture

We've reached another permanently high plateau.

SheepDog-One's picture

Strong like BULL!    (shit)

Non Passaran's picture

The chairman said the same.
Nominate the man for Nobel prize economics and then let's see if Turbo Timmy can do better!

fonzannoon's picture

Shit you get 25 greenies for that and I get a bunch of poo throwers who can't take my sarcasm anymore?


madbraz's picture

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.



Matt's picture

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.

madbraz's picture

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.

Spigot's picture

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.