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The Macro-Market Three-Legged Stool
Until the great-and-powerful Ben pronounced the Taper, US Treasury bonds had tracked the deteriorating macro fundamentals of this 'recovery' rather well. In the few weeks since, the squeeze has hit and yields have played catch up to equity's exuberance. However, now that the two asset classes have recoupled in the less-supported world, the question is, which of the three legs of reality - equities, bonds, or fundamentals - will move next?
Charts: Bloomberg
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As of, I am holding all of my bonds and equities.
Right. The three legged stool, but a four leg layout. If ya tense your butt cheeks just right you can balance it upright for awhile....
If i was a market player, and i was short bonds, was, it would be coke an hookers tonight.
Short bonds much??
I'll take, "Stocks and Yields Crater" for $1000, Alex.
How many trillions of dollars were made on the short side of bonds?
After missing the great equity bounce of '13, Biderman and Rosie must be about ready to throw in the towel right now.
Okay Will, your question is, what is the first law of holes?
stick your dick in it?
Bonds.
Once the convexity hedging frenzy phase (where we are now) ends, the 10-Year UST yield will head back towards 2.00%.
If bond yields stay where they are now for any length of time, Housing and the economy in general will take a nosedive.
I agree. If stress continues to rise in world markets, treasuries will sink towards their record lows in short order.
http://dareconomics.wordpress.com/2013/06/21/around-the-globe-06-21-2013/
That big green line on the chart - SP 500 - looks like a tree about to be fell....
TIM.................................BER..................ANKEE............................
The dead tree bounce.
A good 1000 point down day should scare people right back into treasuries where the Bernank wants them. Then he can better explain his tapering statement. Or the whole damn thing can blow up with yileds screaming higher and the market cratering.
No fears, just a cool $136 Billion extra in interest payments. Who needs medicare or roads anyways?
In referencing these markets, when you say 3-legged "stool", are you referring to an accessary piece of furniture, or a substance that's, shall we say, a bit less welcome in the drawing room?
Anyone know what the ticker is for US Macro in the chart above? What is in this series?
$370 trillion in IR swaps. Each 1% move in the 10 year is a $200 bln dollar loss or gain for the people trading this shit. The TBTF banks have a true capital cushion of 3.8 - 5.1%.
At this point, we should be betting which TBTF bank fails first. It's going to happen soon.
Just to make this even a little easier to understand, each 0.01% move in the 10 year is a $2 billion dollar move in the IR swaps market. That's money the trading entities actually have to have on hand (cash collateral).
Panafrican I hear you. The only thing that makes sense to me is they smash equities hard next week in an attempt to move money back into treasuries. If they don't then this gets out of hand because is those 401(k) statements come out the following week with yields here the bond market may really lose it's grip.
That being said I, somehow, still think the general trend is upwards in yield.