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Treasuries' Worst Week In 50 Years; Stocks Worst Week In 2013

Tyler Durden's picture




 

5Y yields rose a stunning 37% this week - the most in the 50 year record of Bloomberg data. The 38bps increase in yields is also among the worst absolute shifts over that period but off such low levels it is quite a shock. Credit markets saw hedge protection bought early on in the week and then covered as real money started to sell their bonds on the back of redemptions in the last two days. The high-yield bond ETF had its biggest weekly loss in 13 months (notably clinging to the Lehman ledge levels). Equity markets suffered too (down 3.5 to 4.0% from the FOMC) with the S&P's worst week of the year (even as it bounced off its 100DMA). Most sectors hung around the 3-4% drop but homebuilders are down over 8% since the FOMC. The USD surged over 2.1% on the week with JPY's worst week in 43 months. VIX ended the day down 1.7 vols at 18.8% but beware as OPEX and hedge unwinds into underlying covers seems prevalent. Gold's worst week in 21 months left it back under $1300.

 

Treasuries (especially the belly) were crushed... while in context the move may be small, what most forget is the increasing leverage that has been applied to this constantly compressing market in order to generate returns

 

HYG's worst week in 13 months leaves it back at the Lehman ledge...

 

FX markets were not pretty either - JPY's worst week (Abe's happy we assume) in 43 months...

 

Gold's worst week in 21 months...

 

Since the FOMC, indices are down notably (even with today's Hilsenramp interruption)...

 

and Homebuilders are on their own as momo-chasers realize that high-beta is a two-edged sword...

 

Credit markets did not 'believe' the Hilsenramp but OPEX dragged stocks higher...

 

and the Hilsenramp was all no volume - with the crack lower into the close perfectly ending at VWAP...

The week in Commodities, FX, and Bonds...

 

Charts: Bloomberg

 

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Fri, 06/21/2013 - 16:13 | 3680510 The Shootist
The Shootist's picture

The end is nigh! Woohoo!

Fri, 06/21/2013 - 16:19 | 3680538 Mr. Fix
Mr. Fix's picture

It's been a long-standing prediction that when the rates started to rise, the system would collapse.

 We are here.

Fri, 06/21/2013 - 16:33 | 3680568 Troll King
Troll King's picture

Oh right here it comes, right around the corner.

First, it isn't like the Fed has stopped buying bonds, nor will it any time soon.  Most likely bonds and stocks rebound this summer while feelings are good.  Second, even if we entered another recession, the Fed would just buy more bonds.

Fri, 06/21/2013 - 16:36 | 3680593 CrashisOptimistic
CrashisOptimistic's picture

 

1) Higher rates forcing mortgage rates higher likely will not harm the housing market and Bernanke knows that.  He knows housing is all cash buyers now of foreclosures for transition to rentals.

2) The Federal budget projections dealing with higher rates will stress the Sequester targets (remember, the Sequester is TEN YEARS LONG, an additional $120B cut from the baseline each year), but that's not the killer.

3) The killer is subtle.  The earnings per share increase being seen is from reduction of share totals.  Stock buybacks.  ZH ran an article showing that 75% of EPS improvement was from reduction of the S denominator.  The killer is the buybacks are financed at 0% interest, and that 0% interest now is gone.  The rollover of that short term funding now will have to pay interest out of corporate revenues.  The E starts to decrease even more than it has.  Earnings per share are going to get hit hard from this.

Fri, 06/21/2013 - 16:38 | 3680608 lolmao500
lolmao500's picture

1) the only way for the housing market to survive at this point = banks need to put all the foreclosures they have on the market to crash prices

2) the federal budget projections are bullshit if more than six months-one year out.

3) +1

Fri, 06/21/2013 - 16:46 | 3680632 Troll King
Troll King's picture

That makes no sense.  Why would they need to do that?

Why not let the government continue to support the UST market for the next few months while the housing market recovers?

Remember, Ben S. Bernanke has become the world's greatest banker; this whole "Ben fucked everthing up for us" being said on Wall Street is comical - the Fed can't keep stocks high and rates low forever, but Bernanke knows he has to keep rates in this range for now, so he spooked the markets.  The trade here short term is likely a dead cat bounce for bonds while Bernanke buys some more up.

Fri, 06/21/2013 - 16:43 | 3680621 Troll King
Troll King's picture

Thanks for the answer.  That reminds me - why aren't floating rate funds increasing?

I thought if rates rose my floating funds would increase in value?

Fri, 06/21/2013 - 17:40 | 3680759 fonzannoon
fonzannoon's picture

See LIBOR scandal.

Sat, 06/22/2013 - 07:20 | 3681631 Landrew
Landrew's picture

What are you talking about! If you are talking about TIPS, they rise with the CPI which isn't rising. When rates rise bond prices fall hence the massacre in bonds this week 

Fri, 06/21/2013 - 16:44 | 3680624 smlbizman
smlbizman's picture

i think its obvious that they have to supply more drip....

Sat, 06/22/2013 - 00:33 | 3681463 andrewp111
andrewp111's picture

Aren't a lot of the buybacks and special dividends financed with long term debt? AAPL is one example of this.

Fri, 06/21/2013 - 16:48 | 3680633 Kiss My Iceland...
Kiss My Icelandic Ass's picture

 

 

ditto

Fri, 06/21/2013 - 16:17 | 3680530 Soda Popinski
Soda Popinski's picture

Ben is not out of options.  Instead of printing loads of cash to keep those rates at ZIRP, we'll switch to waving a magic wand over our bond holders.  Kind of like the hopey feely Obama campaign kind of wishful thinking.

Fri, 06/21/2013 - 16:29 | 3680574 KickIce
KickIce's picture

Yeah,  and one day Bullwinkle will actually pull a rabbit out of his hat.

Fri, 06/21/2013 - 16:19 | 3680541 Bastiat
Bastiat's picture

Funxatawny Ben, pulls his head out of his ass and sees his shadow.

Fri, 06/21/2013 - 19:46 | 3680949 This just in
This just in's picture

That's not a shadow.  It's a skid mark.

Fri, 06/21/2013 - 16:20 | 3680542 DaveyJones
DaveyJones's picture

Congress will soon outlaw math

the first half of the latest Keiser Report is pretty good

http://www.youtube.com/watch?v=uYwqS54G-qg&feature=player_embedded#at=718 

Max is melodramatic but then again, bringing the whole world down with criminal banking and political collusion should raise a few seats. 

Fri, 06/21/2013 - 16:23 | 3680552 denverdolomte
denverdolomte's picture

Congress will soon outlaw math

 

+5000 priceless hahaha. 

Fri, 06/21/2013 - 16:20 | 3680544 SAT 800
SAT 800's picture

Silver market prices make a low for the year either in January or mid-summer. It's mid-summer day. Happy mid-summer. This will probably turn out to be the case this year. The Treasury bond rally ended over a year ago. That's when it made it's high for the multi-year move. This is a very interesting and thought provoking post. Certainly more and more people are waking up to the fact that zero, actually, below zero, interest rates and money printing don't go together after you run out of suckers. the recent Japanese experience with their bond market has had a salutary "alarm clock" effect, I believe.

Sat, 06/22/2013 - 16:29 | 3682340 U4 eee aaa
U4 eee aaa's picture

the market usually hits its lows in July, not just silver. We should have a few more weeks of this. Then the big boys come back from vacation.

Fri, 06/21/2013 - 16:21 | 3680546 fonzannoon
fonzannoon's picture

Bill Gross and Gundlach are going to have a hard time getting the tread marks off their backs. Sometimes it's best not to constantly talk you book and just stfu for a few mins.

Fri, 06/21/2013 - 16:26 | 3680550 denverdolomte
denverdolomte's picture

Well with Dr. Do-Little running the FED, and Bumbles spreading democrazy, and Nacy Kerry-gan spreading our foreign policy...what's to expect? Making sense of senseless cents makes no sense. 

 

Edit :: retract asshole stupid comment made.

 

Fri, 06/21/2013 - 16:22 | 3680551 buzzsaw99
buzzsaw99's picture

TIP getting absolutely slaughtered. The pain, it hurts.

Fri, 06/21/2013 - 16:41 | 3680609 Frank N. Beans
Frank N. Beans's picture

mine too

Fri, 06/21/2013 - 16:28 | 3680567 Devotional
Devotional's picture

Loved the "Hilsy" bit

Fri, 06/21/2013 - 16:29 | 3680572 TLT
TLT's picture

Still a long way to go: http://finviz.com/futures_charts.ashx?t=ZB&p=w1

But things can escalate rather quickly.

Fri, 06/21/2013 - 16:35 | 3680577 lolmao500
lolmao500's picture

Congress will still not give a single fuck. Especially RINOs.

Fri, 06/21/2013 - 19:05 | 3680885 stocktivity
stocktivity's picture

Recall Ben's answer to a question about rising interest rates..."Well, we're a bit confused by that". Now if Benny and the Feds are confused, do you honestly think congress has a fucking idea what is involved here?  It's not that they don't give a fuck,  it's that 99% of them have no understanding of this level of economics. They gave all the power to Benny to handle it. He screwed it up and now is getting ready to say to congress..."ok, I'm handing it back to you to fix". I've said all along until Benny stops printing, It's all Bullshit!!!!  Well...all that Bullshit is about to hit the fan because he couldn't stop the printing.

Fri, 06/21/2013 - 16:30 | 3680578 dominating
dominating's picture

can anyone explain why the spy is reported as closing up 0.51(0.32%)by the major news organizations... I was under the impression that it closed at 159.07 today and ~159.40 on thursday meaning it should be down .33. What is wrong with my math????????????

   
Fri, 06/21/2013 - 16:42 | 3680614 random shots
random shots's picture

Ex-Div Date. 

Fri, 06/21/2013 - 16:32 | 3680585 Martial
Martial's picture

DAYYYYUM!

Fri, 06/21/2013 - 16:43 | 3680600 ebworthen
ebworthen's picture

Don't you mean Treasuries' BEST week in 50 years?  (wink, wink).

Fri, 06/21/2013 - 16:37 | 3680603 EclecticParrot
EclecticParrot's picture

With the NBA season over, it looks like the sport of choice for our friend RUT is to play pivot ping-pong, with VWAP stops in between.  The May 3 gap will surely get filled within a week, but longer term do the shorts have enough chutzpah to fill the January gap, or lick the 200 day MA ?  Near term, the shorts may wait until we rebound to the 20 MA in a typical post 1:15 frothy-mouthed RUT crazed rabies ramp before putting on big positions.  Makes me relieved to be a daytrader, missing the crazy overnight chicanery, as those holding positions will need plenty of bromides close at hand, perhaps in an IV drip.

Fri, 06/21/2013 - 16:48 | 3680627 ebworthen
ebworthen's picture

+1 for using "chicanery", "bromides", and "IV" in the same sentence (and the rest).

Fri, 06/21/2013 - 16:54 | 3680649 EclecticParrot
EclecticParrot's picture

In the third and fourth grade, my favorite dinosaur was definitely the Thesaurus, and if the nuns that taught me then could see me now on ZH, getting +1's, they'd be so proud -- er, I mean gratified, pleased and filled with pleasurable satisfaction.

Fri, 06/21/2013 - 17:27 | 3680727 IridiumRebel
IridiumRebel's picture

I used to say "suck my dictionary".

Fri, 06/21/2013 - 19:25 | 3680903 EclecticParrot
EclecticParrot's picture

The many hours spent in detention must have afforded ample time for solitude and reflection, leading to a solid career choice in the investment industry.  Schoolboys less potty-mouthed often end up on less promising paths, such as software engineering.

Fri, 06/21/2013 - 16:40 | 3680610 css1971
css1971's picture

Ooh I sense something epic coming.

Sat, 06/22/2013 - 00:30 | 3681461 andrewp111
andrewp111's picture

How about a Chinese Lehman which then makes a bunch of big EU banks go bust a few months later.

Fri, 06/21/2013 - 17:00 | 3680667 Awakened Sheeple
Awakened Sheeple's picture

UVXY saved my ass this week. Scalping all the way down.

Fri, 06/21/2013 - 17:08 | 3680694 noless
noless's picture

The action in gold over the past couple years looks like 07-08.

Fri, 06/21/2013 - 17:12 | 3680699 Seekingeducation
Seekingeducation's picture

This is a go to site for me, and I agree that this (and more) was just a matter of time. Forgive me if this is a stupid question, but why didn't everyone get out before the Wednesday Bernank-e-cast? Also, I'm still waiting to really get in, am I wrong here? How is there not going to be weeks/months of more pain? The market is completely boosted by the FED, which has to end at some point. BTW, yes, I am actually seeking education (as a novice just trying to maximize my Roth IRA as intelligently as an amateur can). Thanks.

Fri, 06/21/2013 - 17:29 | 3680734 Everybodys All ...
Everybodys All American's picture

First of all it is virtually impossible for everyone to get out. The market is like an auction. There has to be a buyer for every seller.

There very likely will be weeks and months perhaps years of pain.  Markets do not go straight up or down and there will be sharp rally's likely even in a bear market. That is normal. Make no mistake though when interest rates go higher stock markets go lower along with commodities. When interst rates go higher the bond market will go lower and the dollar will strengthen. Understanding the correlations is helpful in trading these markets.

Most importantly though if the Fed is truly getting out of the bond market (which I seriously doubt long term) we will go much lower.

Keep reading. Keep asking questions. This site can help you. A guy I like to listen to is Tom Obrien at TFNN.com. Trades with price and volume and has a show that comes on after the market closes every day. A lot of knowledge for a novice can be gained from him. Understand that no one is fool proof.

Fri, 06/21/2013 - 18:01 | 3680794 Awakened Sheeple
Awakened Sheeple's picture

This sell-off (collapse?) is actually very bittersweet for me, and I imagine many other ZHers. A lot of us have been waiting a very long time for this. If you're looking to get serious about managing your own IRA, I have one piece of advice: trade technicals. It will save you pain.

On a more serious level make sure you have a SHTF plan. Food, land, guns, seeds.. Eventually the banks are going to lose control and it's looking more and more like it's happening now. Most people here don't bother trading for a reason.

Think of this site as the anti-CNBC. The Tylers will tell you what the Wall Street sponsored media will not.

Sat, 06/22/2013 - 17:05 | 3682394 Trampy
Trampy's picture

Sure, it's not Wall Street, but ZH articles (irrespective of author, seemingly) are frequently mentioned by the commentators at Ransquawk out of London and at DailyFX.  

The lack of regard to author is sometimes comical in the way they attribute everything posted here as ZH, because they can say something like ZH says X, and then later ZH says Y, when X and Y are opposites.

It's such a constant fixture there for its "alternative views" that it's referred to simply as ZH on their text feeds.  That should hopefully get some more real traders here who would post about their views of markets.  I hope so, at least.

Fri, 06/21/2013 - 17:19 | 3680710 Never One Roach
Never One Roach's picture

Has AAPL recovred its 40% loss yet? This is the most widel yheld stock and yet I don't see anyone on Yahoo bashing it. They seem to like bashing oil and gold. I guess they don't make those Fat Commissions when people buy physical gold or the etf's for gold (GLD) or oil (USO).

Fri, 06/21/2013 - 17:22 | 3680713 IridiumRebel
IridiumRebel's picture

And we on ZH are having our best week as the reality of true fuckery is being exposed.....

Fri, 06/21/2013 - 17:26 | 3680723 lolmao500
lolmao500's picture

$9 trillion missing from the FED... auditor don't know where the fuck it is.

http://www.youtube.com/watch?v=cFdnUUxxigs

Fri, 06/21/2013 - 17:32 | 3680740 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

5Y yields rose a stunning 37% this week - the most in the 50 year record of Bloomberg data. The 38bps increase in yields is also among the worst absolute shifts over that period but off such low levels it is quite a shock.

The 54bps increase in the 5-year real yield (TIPS) this week is a more significant data point.  Higher real yields are a bitch when it comes to most asset classes (stocks, bonds, commodities, PMs, real estate).

Fri, 06/21/2013 - 17:44 | 3680762 Zero Govt
Zero Govt's picture

 

"Treasuries' Worst Week In 50 Years"

and it'll get worse

then the appointed nappy changer nanny of Govt and banking, Benneth Bernanke, will be holding all the soiled nappies of Wall Street and Washington, the 2 biggest juvinile losers and abusers of society as is his rotten mandate

got your hands full of other idiots crap, it suits you crone

 

Fri, 06/21/2013 - 17:52 | 3680779 BurningBetty
BurningBetty's picture

Somethings got to give..

Sat, 06/22/2013 - 13:09 | 3682031 Trampy
Trampy's picture

Only fools are buying bonds here.  This is a rout for the history books of TA ... and our economy, BTW.  All the smart money is accumulating new shorts and liquidating longs

Pull up a weekly continuation of ZB and you'll see in 2011 it flirted with 135'01 and 135'05 a few times but couldn't break the handle.  2012 couldn't get below 135'05.  Higher lows, by a few ticks, but this is ZB, the deepest market on CME.

Friday it decisively broke 135 for first time since 2010 and since i trade ZB using options was watching the calls to see if there was any buying to signal an overshot bottom worthy of scalping a small bounce.  No dice.  A fluke morning dip below theoretical to 22 ticks (?) wasn't caught to be long over the weekend for a Sunday night London recovery bounce.  Hardly any volume in the major 140 strike.  But the OTM calls were being SOLD on the rallies, which tells me the smart money is sure this is an outright sure collapse and that 135 will become the new ceiling after consolidation.  Two years of being the floor, now it'll be the ceiling. 

Breaking a new 3-yr low in a market a thick as ZB is extremely significant.  The general rule on bounces goes that the third bounce is the strongest while the fourth bounce often doesn't happen.  No matter the chart setting, Friday was at least the FOURTH bounce and it didn't happen as per the rule.  So, it's safe bet that ZB is headed down from here with next stop at the 1.27 extension of the Bernanke selloff which i'm seeing at 134'03.  But since that's not a significant level from 2010, we have a long way to fall in the 30-year and it's a long way to 130 and then 125, the major levels in 2010.

Plan is to wait for rallies to resistance, and then buy puts below and/or sell calls above, both naked, but with tight stops.

Is anyone else planning to trade this collapse in the 30-yr ?????  If so, what's yr plan?

 

 

Sat, 06/22/2013 - 16:32 | 3682347 U4 eee aaa
U4 eee aaa's picture

As this week's action amply demonstrated, it doesn't matter......until it does

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