The Max Pain Trade

Tyler Durden's picture

But "they" can't all be wrong, right?



And this is not helping...




Not a single economist taking part in a separate survey believes an economic downturn is possible.

“Economists are unwavering in their assessment of where yields are headed in the next half year.


Jim Bianco, of Bianco Research, points out in a market comment Tuesday that a survey of 67 economists this month shows every single one of them expects the 10-year Treasury yield to rise in the next six months.


The survey, which is done each month by Bloomberg, has been notably bearish for some time now, with nearly everyone expecting rising rates. In March, 97% expected rising rates. In February, 95% expected yields to climb. And in January, 97% held that expectation. Since the beginning of 2009, there have only been a handful of instances where less than 50% expected rates to rise.


Still, the fact that every single survey participant is bearish is striking. The last time the survey had that result was in May 2012, when benchmark yields were well below 2%.


“Literally there is maybe one economist in the United States straddling the bullish/bearish divide on interest rates. The rest are bearish,” Bianco writes.


He adds that a J.P. Morgan client survey shows that the percentage of money manager respondents who said they are underweight Treasurys is the second highest in seven years.


This is all the more surprising when we consider that investors went into 2014 thinking yields would rise significantly. Instead, the benchmark yield is lower than when the year started, as the market waded throw subpar economic data, geopolitical tensions, and uncertainty over the Federal Reserve. The 10-year note last traded at a yield of 2.72% on Tuesday, down from just over 3% on Dec. 31.


Then again, a separate poll of economists recently showed that exactly zero expect the economy to contract.


But when the entire market thinks one thing is about to happen, the opposite outcome is often in store, notes James Camp, managing director of fixed income at Eagle Asset Management. So don’t count out that result with Treasurys, he advises.


“It’s the most hated asset class,” says Camp, but Treasurys are some of the best performers year-to-date.”


And remember who was telling its clients to sell (them) their bonds?

And just in case you were wondering what else was crowded... VIX shorts...


Chart: Bloomberg

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max2205's picture

Not when the fed is involved...remember they telegraph or twit their moves so to enrich the TBTF and besides they make huge money on these moves....nope II'll believe it when I see it

derek_vineyard's picture

the fed is capable of doing most anything to keep rates down (if thats what they choose) so you are playing a loaded game.  maybe the fed will want a washout or maybe they'll buy the whole friggin lot of long durations.  Betting against the government is a risky game. My guess has always been lower and lower rates until BOOM. ....then you want your metals.

I am more equal than others's picture




Interestingly Jesus threw the money changers out of the Temple right before he was crucified.  When he challenged the defilers of the Temple they killed Him. 

LawsofPhysics's picture

Come on. when the underlying currency those things are priced in is being printed into oblivion...

the new normal, soon everything will be unaffordable...

hobopants's picture

ya, nominal to the moon, real into the shitter...I still hold firm that the dollar breaks before the market does.

SheepDog-One's picture

An economic downturn? INCONCEIVABLE!!

rosiescenario's picture mean a REPORTED economic far as I can tell, we never came out of the last downturn, but that is not reported.

Mr. Delicious's picture

All I know is Asian Women Are Seeking Love...  and them niggaz ain't buying t-bills, son!

ebworthen's picture

We are in a depression, yet the pundits debate about if we are "entering" a recession.

The cheating lover lies without shame nor blushing.

They can look you straight in the eye too.

Mr. Delicious's picture

we don't really have a word for what we're in.

it's like being raped with your own dick.

Rip van Wrinkle's picture

"They can look you straight in the eye too."


Psychopaths can look you straight in the eye, too.

realWhiteNight123129's picture

Well, I was short at 1.60 and covered at at 2.75. Flat right now, going in very slowly, will accelerate at 2.25% on the 10 Y....


People will have to be full of "Japan Japan Japan" and then you short. US has large external debt. 

stant's picture

But what are all these unemployed gov workers going to do? Rob banks?

BlackChicken's picture

No. They will continue to rob us, just privately.

They don't know much else.

It blows me away how many people recieve their legal tender from the .gov

Rainman's picture

More wrong way advice from the Squid ... love it.

Winston Churchill's picture

Wrong advice FOR the squid.

Comte d'herblay's picture

What does the 'economy' (an urban myth) have to do with anything?

You act as if the the 'economy' is some kind of barometer, a gauge, a measure of something that is most important when the 'economy' is what pedestrians use in order to survive.

At one time the economy was the zeitgeist but those days are long gone.  The 'economy' is the prehensile tail of the new dynamic, the new pair o' dimes, totally useless for the purposes of paper assets markets, precocious metals, and ZIRPz.

Adapt or perish.  


OC Sure's picture

Open interest is expanding as prices move higher, therefore, this rally is not just short covering but genuine buying from longs.

monopoly's picture

“It’s the most hated asset class,” says Camp, but Treasurys are some of the best performers year-to-date.”

Wrong,! Our miners are the most hated asset class. But that will change, that I know.

Notsobadwlad's picture

Miners and smelters need to disintermediate the banks ... but that then means that they have excess capacity and a shortage or working capital.

Oh well... I guess the miners will have to relearn how to throw off their fiat chains of bondage and be business people.

disabledvet's picture

Well...since the Government (meaning taxpayer) is the intermediary now...tell the Government to extend the credit!

I hate being long cash because it only yields 1%...but the yield chasers are simply conforming to their own view of the how the world actually is.

No economist will say "interest rates are going lower" because that doesn't allow them to massage the data to claim "imminent economic boom dead ahead."

So "as long as the lie is consistent it's all good."
Just ignore the data....and reality itself!...and enjoy this Wondrous World of Epiphany dude!

No wonder Pfizer is gonna buy Glaxo for 100 billion. "Clearly our pharmacological solutions still need improving upon."

buzzsaw99's picture

most hated asset class by whom? the dumb ass shorts? pay my coupon bitchez. the 30y is a screaming buy.

realWhiteNight123129's picture

The basis of the Short TSY HAS NOTHING TO DO WITH RECOVERY. It has to do with currency crisis. 

Henry Thornton 1810: He explains that if a country buy its own debt eventually FOREIGNERS WILL ASK HIGHER YIELDS AS A COMPENSATION FOR FALLING CURRENCY.


db51's picture

Any chance Henry Thornton's Theory of 1810 will come to fruition in my lifetime?   I highly doubt it.


realWhiteNight123129's picture

You must be a retiree to make that statement. Henry Thornton was not a theorist, he was a succesful banker when there was no bail-out and you had to survive banking crisis not to end up in jail as a banker (Bankers were liable for deposits). So he knew how things worked in practice and he avoided many crisis. Practice is better than theory. That phenomenon happened many times, you have to look at the history of rates from 1866 to today. It is almost axiomatic.


Why do you think a guy like Rogers who knows one thing or two about economic history is short treasuries? Kyle Bass is short GJBs for the same reason, but the debt of a country should be computed on a net basis against the foreign countries, and in that respect the US has a way worse situation than Japan in terms of net external debt. 


For sure that will be a shocker to many people but not to those who ahve seen similar past cases. But Thomas Tooke observed the same phenomenon, and so did Rueff... Financial repression can not work indefinitely.


fonzannoon's picture

Where do you see anything current that Jim Rogers is short treasuries? I see today he still believes gold will head back towards $900. Bass is short JGB's because they are not backed by the MIC.

realWhiteNight123129's picture

The TSY are a promise to repay USD, if confidence falls and USD tumble, how can the schedule payment of dollars in the future (TSY are scheduled payments of dollars). So if the foreigners lose faith in dollars today how can they keep faith in dollars in the future? That is why a crisis in USD in an automatic crisis in TSY.



fonzannoon's picture

I'm with you there. I just see no proof that foreigners are losing faith in the dollar. I see Russia being cut off from it. I saw the EM markets that did not have enough dollars get their ass kicked all over the place when the taper started. Then they got a reprieve when the dollar fell, and what did they do?

I know that even outside of belgium that Foreign ownerership of UST's keeps breaking new highs. 

So while I agree with about "what if" I just don't see any proof of it.

BrosephStiglitz's picture

There is plenty of evidence.  That's coming from a "foreigner".  The evidence goes back to 2002, or earlier when Saddam tried to price his oil in Euros.

Some countries may be snapping up dollars, but the tides are turning.  Short to medium-run the dollar may be fine.  In the long-run will continue to lose ground.

fonzannoon's picture

I appreciate the sentiment, but I still don't see much evidence.

disabledvet's picture

Again...we STILL do not know what is on the balance sheets of "the Banks."

That would be ALL of them!

We do know that Treasuries are being bought hand over fist...but that tells us "mere collapse is imminent."

There is something that comes After Collapse as well.

realWhiteNight123129's picture

Well I am a foreigner too. Cut all my dollars, back in 2012...

fonzannoon's picture

and is he related to Thornton Melon?

Armed Resistance's picture

Yes- he was the originator of the "Triple Lindy".  


Call me sometime when you have no class.

TimmyM's picture

It's not PC to use the R word until a non systemic reason is created for it.