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7Y Treasury Yield Drops Below 2%
The plunge in yields continues and even unflappable stocks are starting to crack a little... 7Y Treasuriy yields just cracked below 2% for the first time since Nov 2013. What is perhaps most worrying for the exuberant equity market is the dramatic flattening in 2s30s today (2Y +2.5bps, 30Y -9bps on the week). Wondering why bonds keep rallying... see below...
Yields are tumbling across the complex (except the short-end)
Leaving the 7Y back under 2%
With 2s30s at one year lows...
And this is why... Treasury shorts actually added into the rally of the last few weeks...
Charts: Bloomberg
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Flight to "safety"...
Now about that counterparty risk...
Something wicked this way comes...
DOWN goes Frazier!!
a buddy of mine saw on Bloomberg earlier that the fed is buying 91% of all issuance in 2014 as opposed to 63% in 2013. it's amazing yields are not lower.
fonzy we are pretty much following japans lead from what i can see
everyone should see jim rickards interview on usawatchdog. he describes what is going on in belgium and the mechanicsinvolved.
in summary, he believes the european central bank is indirectly printing euros by using treasuries to swap currency. my guess is its for deutchebank.
http://usawatchdog.com/catastrophic-outcomes-may-come-faster-than-expect...
This is going to be interesting. They will need about a 350k NFP report to fraud the 10yr back to 2.5% next week. We went from QE4eva to they can't get out of QE fast enough.
Fonz, how are they going to service debt and yields on debt when the amounts are getting larger and larger?
Rates can only go down further until some of the debt needs to get renegotiated or defaulted upon. Iceland is in the process of breaking down their debt and it will affect big banks everywhere (small fry but still).
There is alot of cash and cash equivalent parked. Whether in private or corporate hands, the amount of money that's looking for yields is phenomenal.
Nobody in their right mind puts their own money into the fairy tale equity markets. Maybe allocate some of it in dividend plays but that's not what has levitated markets upwards. ZH reported where the money to keep the illusion afloat is coming from.
Everyone with cash and cash equivalent paper is waiting for rates to go up and then make a move. Ain't gonna happen. The Fed and all other CBs are cornered. Same goes for the TBTF banks.
As soon as any quality grade paper offers better than 1% or 2% yields, the show is over. The rush into that paper would be crazy wild.
In the meantime, QE keeps priming the pumps and more worthless fiat sloshes around and gets horded by those with the privilege.
This is a completely new paradigm. Return to "normal" can only come if we experience major pains and losses first.
"Normal" is $30 oil.
Expecting that?
i dont think the fed has cut any qe......they are just hiding it thru belgium et.als....i would bet it has increased if anything...i could be wrong...
Never again.
What's your take on interest rates then? Can they raise rates in this "new normal" with oil North of $100?
i dunno man i believe there is a ton of money in equities right now. the 401k/IRA money is penned in and can only choose between pimco and fidelity. There is no other avenue for capital to flow to. people have rotated into cash for 5 years only to come back in. easier to just hold some telecoms and utilities and collect the div.
I think it's been discussed here that the "Great Rotation" from bonds or cash into stocks is not happening. The cash is still cash and equities' volume is on vapor. There's no point to crash the markets now because there's nobody to take from.
"There's no point to crash the markets now because there's nobody to take from."
Correct in the real world. But in the sociopath's world (and all TBTB are sociopaths) there is ALWAYS somebody to take from. Never underestimate the desire of a sociopath to win at all costs. They will sacrifice anyone and everyone for the smallest of gain. Strangers, neighbors, co-workers, friends, family, it doesn't matter. Hell, they will rob the dead.
That "rush" that you talk about, it is going to be (is being engineered to be) into Bitcoin. I think that's pretty clear by now.
"Return to "normal" can only come if we experience major pains and losses first."
Depends on who 'we' are. Nationalize the Fed, and 33 - 50% of the Treasury debt disappears. Congressweasels could do it in an afternoon.
Boon for the American taxpayer. For the bondplayers, not so much.
Faith in the gun of government taxation? Or faith in central printers? 'Cause it sure isn't "economic growth"...
neither, just more frontrunning of the "taper"...
(hint; there is no fucking taper, show me the balance sheet motherfuckers.)
With the buying in Belgium, there is actually more treasury buying. Not less.
With the gold market controlled, there is enough money for everything to go up. Pretty simple
Correct. The Fed is "the market" and they have plenty of "money" to do whatever they like to the "market". No one else with deeper pockets is even playing anymore.
The Fed is the CASINO.
The Fed always wrong, and never by the book.
Absolutely correct. Use the printing press to monetize the debt. Corner the bond market. ZIRP forever allows the cycle to continue. Wipe out the bond vigilantes to protect the scheme. Transform govt. debt into an all powerful, all controlling govt. security state so there is no threat to the NWO. Printing Press + Market Control + Govt. Control = Perpetual Ponzi. It's a bankers ultimate wet dream, and the world's nightmare.
It's about no growth.
GDP rev is out tomorrow. Pop on over and look at what they've done to consensus in order to get a beat.
-0.5% consensus.
Nobody is talking about it other than yours truly, but it is damn hard to get economic activity when oil HAS BEEN NORTH OF $100 MOST OF THE YEAR.
Just hit 10 yr 2.44%.
Japan is the norm. They have no growth and import 5 million barrels per day to ensure they will never have any.
The US has a long way to fall to that normal level of interest rate for a zero growth economy.
What's 2.44% of nothing though?
let's see... 10% of nothing is (mental calculation).... nothing.. - Jane
Shit, soon enough there won't be enough calories available for consumption to simply maintain the status quo, let alone grow.
0zer0care Death Panels will take care of that. Just take the VA example and multiply it to infinity. I've said since day one, that 0zer0care is Soylent Green HC.
Yes but "no growth" will also run head on into "price inflation" which will win? Don't know. But stocks will get slaughtered.
Price inflation? Priced in what?
Let me put it this way, there are 7+ billion people (and growing) on this rock all competing for a better quality of life and the commodities and calories that make that possible.
In short, there is still plenty of demand for goods and services of real value.
There is no monetary, fiscal, or political solution to scarcity, period. there never has been.
they got those really cool 3-D printers now, man...they can make anything with them. It's just like Star Trek now, so they'll be able to print all the calories they want.
See...no worries!
got Silver, bitchez??? ;-)
The new American Industrial Base of the new American Century has no need for oil - what do LNKD, FB, TWTR, NFLX and AAPL need with oil? This is the miracle of the new economy that will keep stocks soaring majestically to new highs, as bond yields continue to collapse, demonstrating why debt, and ever more debt is essential to stability and prosperity.
None of those put food on the table.
Literally.
strange indeed..very strange...something is up...why the rush to saftey????
If everyone is shorting...who is buying these new issues???
Belgium?
Wall Street is buying. They're shorting massively everything...including their own companies...but are in the whole for a few trillion on the treasury side of the ledger (levered 100 to 1) and are now being forced to cover (buy those treasuries) "at nosebleed levels."
We're heading towards total mayhem both here and in Europe. I would highly recommend turning the internet off for starters.
Turn it off??? Shit negro, I gots my hot buttered popcorn and am ready to watch the fireworks go off!
kettlecorn and some OE-800 bruh. belgium was the canary in the coal stuff. european banking crisis in 3.2.1...
http://en.wikipedia.org/wiki/Bad_bank
They semi-secretly setup bad banks to the entire European, Australian, New Zealand, Canadian, Mexican, MENA banks, Israeli, Argentinian, Chilean, Brazilian...everywhere really, to dump all the debt into. Hard to go wrong when you can put a single dollar into a bank with zero fractional reserve limit and print to infinity using shadow bank derivative rules (there are none, lol)
Basically the Fed was going to hang every single one of their partners and everyone in those countries.
Remember they glued all the central banks at the head years ago to make sure the bad bank thing could happen. And the only possible outcome of that arrangement is to destroy all of your business partners. (fuck politicians are stupid, they agreed to it, ignorant fucks the bunch of them) To do that while running the clock, you convince all the ruling idiot sticks on this world to play three card monte. What they didn't tell the idiot sticks is the arrangement is built to be fatal.
BoA, Goldman, JPM made arrangements to wipe every last one of you out. If someone thinks they were going to make it out with the 'circus', they weren't. To these people everyone but their own inbred, sterile blood lines are 'useless eaters' even the better dressed ones.
All the way up the chain across all economic strata. Because it doesn't matter where you are, who you are or what you do. It's been jerry rigged to implode totally and completely across all cross paired FX. It's a 'Samson' option of financial trading.
It's built to be an endgame no matter what anyone does. No one was going to walk out of the Bank paradigm with a real nickle in their pocket. (maybe except Kyle Bass, he's got rolls of real nickle Nickles before they were made with tin with nickle plating)
Couple of things:
Only thing that TPTB can possibly do now is create a 'badder' bank. LOL...won't get that far though. Most of them should be in the jails they helped under fund with people they put there with their laws.
I need to go turn on CNBC in order to see what this means. whatever it is, it is bullish for stocks (ignore today's slight RED).
Gold below $1260. No safety trade here.
Why is gold dropping? Because they want it to
The dumbed down deranged gold bugs have broken their illegitimate childrens piggy banks over the shiny yellow metal? Indo-China selling reserves to mobilize for war? When you say "they" it helps to once refer to a particular entity..they the rockefellers or jesuits..or annunaki
PS the red pill was a chemical lobotomy, a consolation so was the blue pill
Run along retard.
only tards use the term "yellow metal"
The same could be said for Chinese steel.
"Why is gold dropping?"
because its goin into the close in London....
thought u knew by know.
they take their anger out on gold. it is some sort of stress management technique.
Because the system allows the playing of endless games with unlimited amounts of paper gold. This will only stop when so many buyers take delivery that they run out of real gold with which to supply them.
The treasury shorts are really going to be butt hurt when the ten year continues it's push downward twaords 1%.
We're overdue for another SPR release threat. It's about the only stimulus that can be injected now, and that might stop the yield fall.
Low growth; low yields.
Well, if we have free money, why not free oil?
And free beer, while we're at it ...
Free hookers and blows for everyone!
Repost (sorry) from today's other piece on Treasuries:
With the US 10yr just touching 2.45% while at the same time US equities are at all-time highs AND the big-money short Treasury trade still not unwound, I am even more confident that the 10yr yield has much further to fall.
Imagine if stocks correct by a mere 10% (no crash, just a long overdue correction), and the scared money rushes to the safety of T-notes, yields will crash down hard....only leading to MORE pain for the short Treasury crowd, which will eventually cry "uncle" and get out....sending the yield down even further.
I wouldn't be surprised to see a sub-2.0% yield on the 10yr later this year.......so I'm staying long and will add on price pull backs.
Imagine if the Chinese and Russians really do start a shooting war with one of America's allies.
The issuance would be staggering and that issuance would be bought massively.
We are both on the same page. Rolled out of small caps into large caps and bonds in the beginning of the year now I'm taking money out of large caps on rallies and adding into bond positions.
Germany's 10-yr is at 1.337%; Japan's is at 0.586%.
Impossible to know the future; but mathematically; they could stretch that out into another two to three year creeping bond rally with the U.S. 10-yr still at 2.4395%.
all these low yields show is that we have never in our history been a more qualified borrower. GO USA!
{S}
I guess I'm not the only one loading up the ol' MyRA account. If it's not nailed down, I'm selling it and rolling all my cash into 7yr treasuries. When I poke me head out in 2021 and see blue sky, I'll consider equities.
Sad that someone can miss that bit o' comedy.
Is there a limit on how when factoring inflation yields can go negative? Since there isn't such a thing as competing currencies in a unipolar world and the difficulties of changing WRC status quo, trading bonds sounds like a pretty safe ponzi to buy into right?
i think that jim rickard said that he expacte 10y yield under 1%
link?
i will try but this interview was cuple of months ago
sorry. try on your on. it was somewhere around, when 10yy was 3%
I daresay it, but treasury rates seem to be the least manipulated thing going these days.
Go PIMCO Go.
Buy hook or by crook.
If this reflects subdued inflation expectations or a flight to safety, why the fuck is the S&P at yet another high?
Bomb, bomb, bomb, bomb Belgium.
It reflects Japan style growth. And thus we'll get Japan style rates.
No comparison at all, Japan has a shrinking population, so deflation and stagnating growth - though not in real income per capita - is what you'd expect.
The US, though, has a growing work force but a shrinking labor participation. Squaring the circle.
and gold continues to get hammered to new 52 week lows....
economic
sink holes
Is Gold still the best YTD ???
/sarc.
I think the writing is finally on the wall that we are entering a recession. The weather excuse is no longer cutting it. Look for flatening.
It will be sold by the lamestream media as a Recession, or even a Double Dip Recession since we never regained the economics of 2007 (except for Wallstreet). But the reality is we have been in a depression since 2000. These booms and busts all just engineered noise in the system by TPTB to simply redistribute wealth from the masses to the elites. Same as it ever was. The end game is the perpetual ponzi, and they almost have the bond market cornered enough to pull this off. The New Feudal World Order is almost here.
Gold getting shitted on by the tribe once again.
http://www.mineweb.com/mineweb/content/en/mineweb-fast-news?oid=242324&sn=Detail
At a most interesting breakout forum alongside the Bloomberg Precious Metals Forum on Friday, Peter Goodburn, Founding Partner of WaveTrack International presented his analysis of what will happen to the gold price based on Elliott Wave theory (for notes on the Elliott Wave principles see foot of article.) And there was something in it for short term bears and medium to long term bulls – with the latter definitely benefiting most if the wave pattern plays out as projected.
To an extent Goodburn’s projections support the views of those analysts who see gold falling back to around $1100 if the Elliott Wave pattern plays out as predicted, but not for long! He showed that the gold price has been following an archetypal Elliott Wave price cycle and that the overall ‘gold ‘supercycle’/bull market, is not yet complete and will see another surge which will peak at the end of 2015 or very early 2016. But in the meantime the price would fall to the projected low of $1096 (give or take a few dollars) as part of the fourth wave retracement down from the 2011 high of over $1900 - and this low point will happen in July/August this year (which would enable the bearish bank analysts to say I told you so!).
Wait for it!
https://www.tradingview.com/x/J1vzEXmG/
I hope Ag and Au (paper) both continue to get hammered. My cost averaging is going down, down, down while my stack size continues to go up, up, up. This criminal paper price manipultion downward totally works for me as a phyzz stacker. But if they hammer it too far down we're going to see massive supply shortages and/or record premiums. The Crimex will eventually go bust.
Stack as much phyzz now while you can and while supply is out there and premiums are low. Once the SHTF and this monster turns around it's going to stampede all over everything in its path.
only muppets could be dumb enough to short Ts
meanwhile, yet another v=shaped recovery in all the fucking fraudulent equity indexes....
farcical...
Short squeeze in progress. Keep an eye on the Fail to Deliver numbers. With a shortage of Treasuries available to borrow, gamblers are going short without borrowing the T's first, hoping to cover later---and failing. The boys in the repo game must be running around with their hair on fire this morning.
As usual, ZH is ahead of the story: http://www.zerohedge.com/news/2013-06-17/following-surge-fails-deliver-t...
Yields on rental properties in Germany are in the crapper. The "best" place to buy rental units is Wolfsburg with an average yield of 1.4%.
You want to know why everyone is buying USTs at >2%? Because there's no fucking alternative to get any return on fucking anything.
In the meantime the wealth balloon inflates greater and greater until it inevitably has to go boom. The wealth cannot be sustained, not even at 1.4% let alone >2%.
That's the real story. There are no yields in quality grade investments. Whatever is offering 5% or higher will get renegotiated or get a haircut. That's the road we're on.
Someone is bullshitting. Stocks or bonds. Which pool do the big fish swim in? The guppies? This is fear trade plain and simple....
So...
Periphery nations continue to produce bonds - which have been very pressured, with increased yields and increasingly discounted face value.
The ECB has liquidity assistance mechanisms...
What if the ECB continued to accept Periphery bonds as collateral, despite obvious and continuing fiscal malfeasance, but sterilized the purchase by swapping the bonds with the US Fed in return for Treasuries?
This would amount to future QE, as the Dollars will need to be printed when the Treasury Bills expire.
For the EU Periphery and the ECB it would be an explicit statement that they WILL have QE (or the periphery nations will default on bond expiration, with no possibility of roll-over).
But it seems to me this would allow them to delay the date of the QE by having the effects of the QE on peripheral bonds now, with the resultant increase in Euros to come later...
The UST's were already monetized...just not through "Open Market Operations". Instead they used the ECB's account and 'created' the dollars there.
And in return, the ECB stakeholder banks (some of whom are the same banks behind the Fed) then use the proceeds to purchase stocks... supporting the S & P.
Seems elaborate. But does it fit the evidence or am I missing something?
I think you've got it chap. Add in the BOJ printing trillions in Yen and converting the $/Euros and then buying anything that moves you see why we have low yields on bonds everywhere and highs in stock markets everywhere
Second thought...
SUPPLY AND DEMAND:
Money is going into bonds and stocks at the same time. Not flowing from one to the other.
IMPLICATION - increased quantity of Dollars in circulation NOW. When the supply goes up without a corresponding increase in demand.....
Could banks be using some of their excess reserves in an attempt to 'jump start' the economy?
Clearly someone is 'liberating' a lot of dollars that were previously somewhere (nowhere?) to bid up both stocks and bonds.
Sounds inflationary to me.
Maybe it is time to invest in 'Real Stuff'? ANY real stuff?
You lever stocks and monetize that gain into tsy.
They've all been saying that the massive amount of dollars that are stashed all over will eventually come out swingin' like a banshee. And that once that money velocity got going hot we would then see the shit hit the fan and big-time inflation as all those dollars start rampaging throughout the markets looking for new homes.
That might be now...might be soon...and it just might be the kick in the ass that the actual physical metals need to beat back the paper onslaught that's being used to supress them.
Get your phyzz stacks fortified now at these rock bottom paper prices, folks. Yes, they still could go down further in paper price, but phyzz might be ready to explode and finally break away from the cartel manipulation. Why try and time the bottom when it's not that far away at this point? You could wait too long and the supply could dry up at that point while premiums explode higher to make up for the reversal that the phyzz is going to make once the paper bullshit scheme is finally broken.
Premiums could quadruple in a matter of a few days with no supply for several weeks...and it could go from a snowball to an avalanche in a real fuckin' hurry while the wanters of phyzz will be stuck on the sidelines as nobody will want to sell at any worthless dollar prices.
Personally, I want cheap acreage in the mountains for part of my phyzz once the SHTF.
This is not low interest due to free market demand. This is direct monetization.
Soon we will be watching initial propaganda directed at convincing the public that it would be good to sell and/or use federal lands, interstates, parks, and other national resources as collateral for private bankers (owners of the Federal Reserve included) to support the dollar by "bailing out" the USA.
That may buy a few years, but once the FSA EBT handout will not purchase the calories to maintain their 300+ lbs (sarc) lifestyle and the FSA is sweltering, freezing, or simply uncomfortable, the bureaucrats will convince the politicians and their crony-capitalist masters to impose rationing, price and/or production controls that they, the "Just Us" crowd and the US war - domestic security machine will be exempt from.
After that there might be one more season of food available before the "centrally dictated" costs of production, transportation, processing, and refrigeration exceed the real costs of energy, feed, fertilizer, maintenance and labor.
No wonder the Department of Agribusiness wants machine guns and assault gear.
Exactly correct. I call it the New Feudal World Order, and it is fast approaching. The Serfs will gladly live a minimal existence to just be entertained and have food and a place to live. Bread & Circuses. All the while, the all-powerful state uses it's security forces to quell any rebellion before it has a chance to spread. The evidence is all around us that this is the design, and the implementation.
Good article. It would be nice if Tyler could report any increase in the Fed's reverse repo demand to see if there is some stress going on in the shadow collateral market..
Why is gold falling when treasury yields are lower and inflation is higher?
You might be making short term money from decreasing yeilds but long term these investors will get burned. Even a 1% hike is going to be devastating to many retirement accounts.