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Yields Jump Most In 7 Weeks, Back To 3.00%
Today's 6.5bps surge in 10Y Treasury yields is the largest since November 20th as the Dow slides and USD rises on the back of better-than-expected ADP jobs data implying moar taper. With 10Y back to 3.00% (2.9987% to be accurate), mortgage rates are once again on the rise (despite the recent drop in yields); though for now, Treasury yields remain lower in yield on the year.
Biggest single-day rise in yields since mid-November...
Pressing up to 3.00% but remain lower on the year for now...
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Kill it with fire!
The Fed will use the dollar like a flame thrower.
I think that is a good term for the USD, flame thrower currency, used to fight wars, kill gold, keep the ten year below 3%, stocks sky high, kill the middle class.
Don't worry folks, Janet's just now opening the gas valve. Ben's teaching her how to work the ignitor. More flame thrower dollars coming your way.
You're scaring me. Might have to take a drink before noon.
Wow, yields haven't been this high for... 2 days.
On a serious note, I think we will be at 3.50 soon enough.
Just in time for Happy Hour? What was that about price stability?
Rates aren't about the absolute rate but the relative rate vs. a year ago, 2 yrs ago...and the US has had a period of 34 yrs now of declining rates...which happens to coincide w/ the incurring the largest debt bubble in history...but it's been ok cause every year .gov or corporations or homeowners or strip malls have been able to rollover or refinance at ever lower rates...makes up for a lot of missing wage gains or otherwise absent profits or missing taxes...but but but if 1.6%'ish was the bottom and we have begun a rising interest rate period all the sins will be revealed and 3% will hurt...3.5% will be brutal...4% would send the system into panic all because the debts taken on during this period are alll still there, waiting to reverse all those profit enabling "gains" that declining rates provided...
Actually, 3% is probably bout as far as rates can go without the system starting to lock up and suffer potential Ponzi trublums.
BTW - the debt load in the system now is so much higher than ever before, the growth potential is relatively much lower...so all the debt in the US, Spain, GB, etc. will require ever lower rates ala Japan to allow the continuation of this system...3% is likely bout the counter trend limit before the next lower low in yields...Fed seems to know that their programs don't hold yields down but instead boost asset prices while maintaining low rates...absent the Fed's actions rates would be very low but asset prices would be less than half of current.
BTW BTW - it's no trouble for the Fed to acheive lower rates and only requires they stop QE...but the trouble is stopping QE starts the unwinding of asset prices Fed has worked so hard to boost...but likely a 10% equity retreat will acheive a sub 2.5% yield and maybe down near 2%...I guess it's ez when you have infinite $'s and no accountability
BINGO!
one thng to remember is that although the fed can and does do much to suppress these rates there are factors beyond their control. what can they do when boatloads of bonds are returned to them by foreign holders? china has no more interest in them and has announced as much. bilateral trade agreements are making them even less needed. germany and england are more than happy to process these bonds back to their originator. and all the fed can do is eat it up and add this eventual avalanche to their already sorry balance sheet.
What you describe seems logical but simply has no signs that it has or will happen. China and Japan have increased Treasury holdings from '08 to now from $500 b'ish to both over $1.2 T...increased dollar reserves as well. The dollar has strengthened, not weakened over this period...not because of US strength but faster devaluing and greater weakness elsewhere.
Folks seem to be waiting for some Chinese (or?) capitulation of dollar reserves / treasuries...but there simply is not a precedent nor is the trend remotely moving in this direction. As a % dollar is less of global trade but in total $'s, the dollar is being used in record amounts. Not good, not that I like it, just saying folks should understand all these nations are in collusion, not competition. Nobody is going to light the match that burns it all down.
Chinese or other nations speaking bout bad dollar are just politicians looking for scapegoats for their own domestic purposes. Watch what they do, not what they say.
Good points but it is also true that Japan is deep into its own QE and may not be too interested in US T bills when it has its own debt to service, China has stated it is not interested in increasing its rate of purchasing of T's so they will not fill the gap if/when the US tapers substantially.....can the Fed keep rates down on its own? Not with 17T of debt (and growing) to deal with......if no one deals with the fiscal elephant in the room then the problem will just keep getting more unmanageable....no one in the history of the world has ever had to manage a debt this big......is the Fed really equipped to do so? Are global markets really going to go along with increasing debt, ongoing money printing and ZIRP.....hold their nose and buy bonds?
Higher rates threaten not only equities but also housing....the nascent 'recovery' would be nipped in the bud if rates go above 3% imho. The situation is like being on a motor boat that is taking in water (a leak below the water line). Instead of fixing the leak the Fed has accelerated and it looks as though we are not sinking...problem is the water keeps coming in so more gas is needed to maintain the illusion of boyancy. Once the Fed throttles down the boat will sink even further into the water and the Fed has to accelerate even more just to keep from sinking....this situation just gets worse and worse as more water fills the hull. The Fed has to stop the boat and let someone fix the leak....(fiscal policy). In their defence, the Fed has always said that fiscal measures are required to solve the structural problems...no one seems to care in Congress as long as the boat keeps moving forward. Under this scenario it looks as though more, not less, QE will be required and that it will all end badly unless Congress wakes up or the Fed realises the futility of their actions. The current scenario would not be good for the $US going forward but should be bullish for gold/silver. That's my take on the situation....feel free to prove me wrong.....I am open to constructive criticism and would like to be wrong!
But assuming reversing QE will cause yields to fall assumes money will move out of equities and into Treasuries in response - will that be the case, given that QE is the backstop that gives institutions enough the confidence in the bond 'market' to buy in?
Hey Al,
I don't really buy the premise that QE is the backstop for bond buyers...QE is the backstop for equity buyers and other rising assets...the bond market knows absent QE yields would fall much further because that would be a depressionary situation w/ GDP contraction, equity collapse and bonds the only place institutions could make any yield..
Possible - certainly right now the levered money's going into equities - what do you think about the decreasing foreign appetite for US debt? If the FED wasn't picking up the slack would the PDs step in at current rates?
Hey Al - as much as TIC can be trusted, it shows there is no diminished appetite for Treasury debt...simply less was offered in the '13 budget year ($650 B) because of the debt ceiling impasse..while simultaneously the Fed was buying $540 B...didn't leave much for anybody else to increase their record holdings...but no foreigners sold off, which means all the Fed's buying was new issuance or buying from domestic holders (pensions, insurers, etc.). I know it makes no sense but is what it is. We all expect or believe there will be consequences (negative) to bad governance or poor fiscal / monetary policies but simply isn't working out that way (not yet, at least).
BTW - since Oct 17 (new budget year and after debt ceiling agreement) Treasury has issued about $600 B in new debt...paying back all that was borrowed last year plus ongoing debts of this year...'14 seems sure to be a $1 T plus deficit again
sorry for the threadjack but anyone know....outside of the obvious POMO etc.....which stock had enough of a reversal today to move the ND100 and the ES? I gues that will answer the question as well which stocks the fed is buying.
I see it going to 4 or 5%, perhaps even doubling to 6% by endo of year.
I already hear the pundits backing away from earlier statements like "If we reach 3.5%, things will start breaking." I've noticed they're starting to move that line of death up closer to the 4% number. Maybe even 4-and-a-quarter.
Why do you watch / listen to those fags?
Usually I watch Spongebob in the morning as I'm getting dressed. If it's one I've watched before I switch over to the CNBC or Fox Business echo chamber.
Either way, I usually get a good laugh to start my day.
I get a kick out of Spongebobs dimwit starfish sidekick. He reminds me of Cramer.
$12 trillion in new swaps written since last May has changed the target somewhat.
Its going to need a relatively quick rise to to screw them.
Its coming though.I don't think the FedRes can control the rise rate much longer.
"$12 trillion in new swaps written since last May" - Would be truly scary if any of this fiat actually made it into the hands of the peasants.
these are just empty promises ("insurance" minus the reserves to pay out)...these are sorta like anti-money that allow real money and leverage to the nth
Give me four and a half.
4% is the "danger" number, with 5% being the actual number that breaks markets.
This is all subterfuge, btw.
Bullshit! 4% isn't the number - The number is what you see the Fed defend. Watch ANYTHING over 3% on the 10 yr - Ben is pinging that bitch on every touch.
i've assumed for years that 4% was the critical inflection point in the bond market.only recently have i heard it pegged at 3%. where did they ever come up with 3%? hmmmm...when one looks at the downtrend channel from 1980, it definitley seems that +4% is the bellwether of systemic breakdown in bonds.
Problem is, we need access to the raw data on interest rate derivatives to make that determination. I don't know where to find it and I have not seen it presented anywhere. All that we know is that the US debt will become unserviceable (that could conceivably be figured out with some degree of uncertainty,) many rates will go up and that there are a fuckton of interest rate derivatives floating around out there, and that at some point, rising yields will make that shit go BOOM! So, 3.25%, 3.5%, 4%, 5%, whatever, at some point, it all comes crashing down. So either it all comes crashing down due to interest rates going up, or the Fed gets so effective at manipulating that shit that it comes crashing down when faith is lost in the dollar because of the Fed's actions.
Hold, Hold, Hold......
Wait until it's realized the US is delavuing the crap out the US dollar and countries are quietly dumping dollars.
At some point dollars come flooding in and everyone heads for the dollar exit. It's when the bond SHTF moment occurs.
Just one question, if the Fed owns the entire U.S. bond/T-bill/treasury "market" and everyone else has already cashed out, how do you get a "SHTF moment"?
somewhat retorical as you can "create" all the paper promises you want, but you still need energy available for consumption in order to actually do anything.
DOING things is so last century. We no longer need to do things to bring added value and increase share prices.
LOL! thanks for puking sarcasm all over me...
I would argue that we're going to hit an energy crisis earlier than the game could be extended to if we had some integrity in our system. In the US, we already pull less oil out of the ground than we consume, and the degree to which this is possible in our case because of the petrodollar. Even taking the most optimistic projections about tight oil into account, we will not be pulling enough out of the ground in the future to meet today's consumption rates. But the system is dishonest, and energy constraints are already starting to put pressure on it. I think that because our economy is a ponzi, that pressure is going to break things before they would otherwise need to break. Ponzis must continue to grow to survive, and those constraints have already stopped real growth. In short, a pending energy crisis is going to precipitate a financial crisis that is going to make the energy crisis happen earlier, at least for the US. That's my opinion on the matter.
It's those foreign holdings of US Treasuries and USD that concerns me. The Fed doesn't own the entire market yet. I don't think that China would need to announce a fire sale of its holdings to throw a wrench in things. I think that it would just need to start selling them bit by bit, and eventually, BOOM! It would force the Fed to print more, regardless of the alleged taper, and a lot of people would lose faith in the dollar, of which there are enough held by foreigners to really wreck our century.
Huge volatility in the FX market.
Up and down like a whores' drawers.
I need Jackson Pollock to make sense of my 15 minute charts.
IMO, there are a good number of over extended pairs just waiting for nice counter trend moves if not full reversals.
This is good, right?
Why no comment by zerohedge on NY FED orchestrated reverse repos that aid primary dealers in shorting treasuries and boosting their interest rate swap book.
What a crooked organization, the NY FED.
Uhhh..
WTF Chart Of The Day: Fed Soaks Up Record $200 Billion In Year End Excess Liquidity -Zerohedge 12/31/13Market slowly melts up with the 10 year
When you control the money spigot and the news spigot, all this is just so much wiseacering...
ori
Don't worry guys. We can print our way out of this!
-Mike Norman
Look throughout history and printing doesn't work. Especially the rate the Fed and other countries have been doing it.
We forget history, this time it's different. We know how that will end up.
Mike Norman, LOL, I actually feel kinda bad for that guy. It's pretty clear that he had some sort mental breakdown after lauging at Schiff on TV, only for Schiff to be right in the end.
Haven't you been watching CNBC? 3 percent no longer matters....now it's 4 percent, but when we reach 4 percent, well, really you only need to be concerned when it reaches 5 percent. In any case, keep buying stocks.
Have to sqeeze the last buyers in to the crowded room. The big players already have their exit.
3, 3.25, 3.5, I hope I never buy another bond unless the libertarians take over
The FED is packed to the ceiling with CRAP mortgage backed securities it paid full price to Wall Street.Many of these PAPER securities are linked to the interest rate,and the default rate will skyrocket if the FED rate goes above 3%.We in the West have built a Tower of Babel on a foundation of quicksand.Meanwhile the Chinese keep on stacking....
The FED did not pay shit, you and I did. It cost the FED NADA.
that's why we will always have ZIRP and LIeBOR, else it goes BOOM!
How convenient for dealers that T-10s to get plowed down in price just before the auction in 1 hour.
Wednesday January 8
13:00 USD 10-Year Note Auction 2.824%
Someone is having fun slish-sloshing other people's money in and out of Treasuries, FX, Gold, Oil, and Twitter/Facebook/Amazon.
Huge Fed Reverse Repo operations are sanctioned Treasury shorting for the "in club". And they did 43 billion today. What is better than the Fed selling you Treasuries, and promising to buy them back the next day at an agreed price (probably higher) and with interest? Then you dump them in the Treasury market for a massive short. Next day you cover and the Fed pays you off.
The Fed is engaging in a Treasury market smackdown for the benefit of a few buddies. Reverse Repos are just getting paid to get paid shorting. The people doing it know the Fed is working with them. And these RRPs are getting HUGE! And, oh look! Treasury smackdown taking place. If you own Treasuries, the Fed is gunning for you now.
Can you kindly explain the mechanics of shorting bonds and how selling them into the market helps to supress rates? If the PDs sell these bonds into the market, doesnt that make the price go down and the yield rise?
What makes you think they are still trying to suppress rates? You don't know what they are doing or why. I don't either. Honey Badger does what it wants. It don't care. But it does not change the fact they have unleashed a shortfest in Treasuries. Low rates were killing pension funds anyway. Might as well grease your buddies while you undo that mistake.
Lean em to one side of the boat and flip, then lean em to the other side and flip. Big crowd on the short side now.
The Ten Year is yielding that rate simply becauce the Fed has allowed it to be so.
Quit pretending this is market driven.
Yellin is in power. When does she insert the tapir ?