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Bonds Ain't Buying It
While the S&P 500 remains stuck at the pre-Shutdown levels, bond markets are behaving differently. Long-dated bonds, benefiting from the ebullient auction are well bid (not what one would expect given the equity surge) and short-term bills (the ultimate indicator of stress) have actually deteriorated dramatically since the White House statement. So what do bond markets know that stocks don't?
Chart: Bloomberg
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Bonds go down invalue as stocks go up, its just fed double speak. Stocks are pricing in no taper tomorrow, and bonds are pricing in a taper within the next three months. The bigger surprise is gold under 1300 and the miners ourperforming the S&P up.... thats a little more surprising to me anyway.
No one wants to hold short-term bonds that may default in a few days pushing yields up. The market has determined that any temporary volatility will be just that and prices will continue rising in tandem with the Fed's balance sheet.
http://dareconomics.wordpress.com/2013/10/10/around-the-globe-10-10-2013/
They are spooking the low end and calming the long, bleeding risk out of the market....
Sound like a socialist banker's dream.....
...naw, it's just Bill Gross selling short and buying long...
Graph doesn't represent actual yield of 10 treasury. Look at this:
http://www.marketwatch.com/investing/bond/10_year
That's because they are talking about the long bond ie: 30yr
Mismatch of Duration. Average Bank is worry about rise rate and is buy bond to hedge long term lend. Soon interest rate is take off like rocket*.
*except NASA is defund and shut down, so rely on Russian rocket, like Proton-M.
Complete mismatch of purchases overall. Those 4 weeks may get delayed but they will get payed off. Those 30 year bonds, don't bet on it.
Dear Fred,
Consider, perhaps, if honor of T-Bill is broken, system already is arrive in hell by handbasket. Worthless debt is extinguish by worthless bond. Consider mathematical proposition of lim h->0, h/h = 1, 0, or infinite. At h=0, who is care because WWIII is more powerful to settle debt than worthless paper.
... but what is Boris know?
Sincerely,
Boris
I believe that miner action is an arb unwind in progress...gold vs producers. Trend reversal is not confirmed in the group...yet...but I suspect it will be clear shortly. I think they will be bought hard into earnings...and then we shall see. Flows into those miners is pretty clear in the last 48 hours.
Of course...the caveat...we have not had a real "market" in almost five years now...so trade accordingly.
The miners are just due. Hatred is not a long term strategy. I don't know when they pop. But I can see them picking up 20% pretty fast if this double bottom holds.
Miners are about to pop because the product they create is being sold at a loss??? Perhaps miners are to be the like the coal industry...driven to it's knees as we turn our economy to some sort of SIMs like virtual world where metals are no longer needed.
The only things that's gonna pop is your head trying to apply logic where there is none.
Bonds know there is nothing but the Fed...
The Fed is not trying to control a $17 T treasury market - $5 T is intragov debt that always gets rolled over so no worries there - down to $12 T - the Fed owns none of the $7 T Bill market - so now the Fed only has to focus on the $4 T Notes / Bonds (TIPS) market...of which they now own over $2.2 Trillion or something like 55% (they are buying Notes / Bonds @ about 150% of their issuance)...so they buy all new plus all rollover. They will own 70% (their mandated limit) of all Notes / Bonds issued within a year @ current QE and Treasury debt issuance.
Did I mention there is no market but the Fed???
by the by - this means pretty much all $5 T of foreign held Treasuries are in Bills...standing right next to the exit.
The bond markets don't know anything, but the Fed knows alot. The Fed is the primary driver of Treasuries now. They can boost long term markets all they want. The point is, no one else is buying that garbage.
asset allocators queuing their clients up for the kill. as always.
I know what you mean. That's what I do to my clients- I shaft them over and over again. Then I tell them "see ya' next quarter! Bring more money next time and you better have some referrals for me!" And they just keep linin' up at the door.
It's good work if you can get it.
Banks need to crank up the HFT in the bond markets! That way, bonds will act like stocks and be easily manipulated! Win all around!
imagine if the fed wasnt buying most of them......
.....that's no way to talk about Ponzi! He's a nice boy and is only looking out for the children
Bonds dangerously close to needing a Guvt FEMA re-education camp visit.
Nothing. They know nothing. Much like stocks. Nothing.
We live in a fantasy FED world. No ones knows. No one matters anymore. Only the FED.
FUCK IT.
Funny, I imagined John Galt with more teeth, and a little more shaven.
There is no possibility that bonds will remain well bid between now and february. No point trying to draw any conclusion about what is currently happening, sorry to say, USA is a joke. Can't even govern itself but want to boss the rest of the world.
Truly pathetic.
interesting that stocks now off their highs. profit taking? nervousness? nothing really solved?
We all know (aside form equity managers) that bonds are a far better discounting mechanism than stocks. And have been for several decades, now.
Bill stresses? Of course there are stresses. Fidelity did right by selling the ones pending maturity/ceiling as they don't want the problem of dealing with how to carry them and potentially breaking the buck. That's just a good business decision.
Long bonds are rallying because there's demand which is there because the bond people believe that the rest of the world (aka stock people) are just plain fucking bat-shit crazy and the world is not all hinkie dorey fine and dandy.
Nothing's fixed, solved or saved and a good level of high current income is smarter way to make money in Financial assets that stocks.
Equity people are perpetual optimists, and that don't work in a Liquidity Trap brought about by a Credibility trap.
http://www.treasury.gov/initiatives/pages/debtlimit.aspx
Debt Limit
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans – putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession.
Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents. In the coming weeks, Congress must act to increase the debt limit. Congressional leaders in both parties have recognized that this is necessary. Recently, however, a number of myths about this issue have begun to surface.
Congress must act to increase the debt limit - I call Bullshit! The increase is the result of Congress NOT acting, ever.
The ONLY thing BO has said that I agree with:
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” Obama said on the Senate floor at the time. “Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”
If Boehner and the red team wimps had any desire to actually win the argument, they would pay to have that video clip played over and over again on as many TV channels as possible.
Failing to increase the debt limit would have catastrophic economic consequences. Really? How broad is your definition of "legal obligations"? Current income would more than cover interest payments on debt, Social Security, Medicare, and a few other items. Perhaps the feds could forego things like giving nearly half a billion dollars to Big Bird and his PBS buddies. Much of what the government does is not properly a function of government anyway.
Personally, I believe that failing to refrain from incurring more debt - failing to live within one's means - will have far greater catastrophic economic consequences.
It would cause the government to default on its legal obligations – an unprecedented event in American history.
Of course, when they default on gold liabilities like they did in 1970 and recently with the Germans they're not "defaulting" on a "legal obligation" are they?
Only an anti-gravity machine can rescue us ... & not the FED's QE version
stocks are in a world of their own. the inverse fear trade/correlation is dead. there is no market, there is only the bernank.
There you go, now you got it! See, that didn't hurt a bit, did it?
And he has got plenty more firepower yet in that printing press.
They know nothing. Pure hedging.
They know nothing. Pure hedging.
A clear demonstration that the Bernanke markets will continue under Yellen. Stocks up, long bonds up, gold and silver down. With the metals, it goes on until they can no longer deliver physical--maybe it still goes on after that but then it means less an less as the real physical market is priced elsewhere.
I already opened my own physical market.
BID $1300USD
ASK $10,000USD
I think wake up call number one was finally driven home at bare minimum a serious consideration that it's time globally along domestically for bond holders to make an adjustment and pump the brakes in future purchases.
Not only can we not limit the printing to pay old debt (Confirmed in the Pres own words along with Lew) but we threaten to not pay the interest?
The signal went out yesterday when Fidelity said they sold out on dates in the vicinity. The signal now goes out that any future dates which near talks and negotiations will be sold well in advance and more importantly internationally... All they while RATES WILL RISE NATURALLY.
So we once again come full circle to ... Who remains.. Who would buy and this chain reaction they just caused if uncertainty means it's only the FED.
Who knows when this charade will end but it will be swift and ain't no liquidity there from the algos when it does.
Meanwhile our dollar should be crashing to Earth.
What do bond market participants know that stock market participants don't? A fucking lot.
Anyone believing the bond market is less corrupt than the stock market is kidding himself. THERE IS NO MARKET, THERE IS ONLY THE FED.
Crash a coming...
This is nothing but a sucker's relief rally. The intermediate/long term is still way the fuck overbought.
DOW up 280 points on the hope of more debt for an untenable debt situation and an economy based on parasitism fueled by debt and debt serfdom.
Makes sense for Warren Buffet and the rest of the 1% but not the nation or it's citizens.
The insanity express steams down the rails! Chugga-chugga...woo-woo!
ya and the headline on ZH is 2 hours old and about some monsanto protest
just sayin'
There, now you can't update the number. It was pissing me off.
lol...I know...went from 250 to 265 to 280 as I was writing a couple sentences.
Bring in Bond!
My question from last week about the possibility of bond yields falling because of an actual default seems less crazy now.
We have the short term bonds going up in yield to reflect risk but the long term yields staying low or falling since (I guess) no one expects the default to last an entire 30 years.
I cannot think of a more sensless response to the situation then rushing into 30 year bonds, but there it is.
I can't wait to get a mortgage when interest rates are half what they are now!
I cannot think of a more sensless response to the situation then rushing into 30 year bonds, but there it is.
POST HOC ERGO TRACTOR HOC
POST HOC ERGO TRACTOR HOC
Really? Doesn't anyone know that US equity 'investors' are the mediocre (scored C, C-) crowd at best? Most equity investors are pollyannas who have no intelligent thought. See John Paulsen....et all
And if there is a default and a credit downgrade with a continual lockup of the government with interest not being paid to foreign creditors and no social security cheques going out and...nah that can never happen...or can it?
Jeez. 13:01 is when the 30-yr auction results are announced. Same time for years and years.
Tyler doesn't know that? What a crock!