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"The Bond Bear Is About To Emerge From Hibernation" BofAML Warns

Tyler Durden's picture




 

"Get ready to change your thinking on US Treasuries. The larger bear trend is set to emerge," is the ominous warning from BofAML's MacNeil Curry. As yields keep tumbling lower, he believes, US Treasury yields are either testing or fast approaching levels from which we should see a base and eventual resumption of the larger, long-term bear trend.

 

As BofAML explains...

US Treasury yields are either testing or fast approaching levels from which we should see a base and eventual resumption of the larger, long-term bear trend (or, in the case of 2s, a push to the 1yr contracting range highs). In 30yr yields, the zone to watch is 3.280%/3.253%, in 10yr yields the zone is 2.420%/2.346%, while, in 2s, the basing zone was 32bps (Our outlook on 2s HAS NOTHING TO DO WITH THE ROLL - the evidence developed on the May-20 reversal from 32.3bps). Even in 5s, further yield weakness should not break below the Feb-14 low at 1.420%, before resuming higher.

This is a stark reassessment of our initial thought process, where we thought 5s could fall to 1.224%/1.248%. However, price action in both 5s and the rest of the curve says that is NOW VERY UNLIKELY. Back above 1.556% in 5s confirms the base and turn.

 

Meanwhile, FOR NOW, in 30s, bears regain control on a break above YTD trendline support (3.443%), while, in 10s, bears need a break above 2.568% (the old Feb-04 low).

NOW, at this stage, we are not advocating going short, but YOU MUST GET READY. THE LONG-TERM BEAR TREND IS POISED TO EMERGE FROM HIBERNATION. Unfortunately, $/¥ bulls should remain very cautious, absent a break above 102.69, preferably the early April highs at 104.13. The risks remain to the downside for a closing break of the 200d (101.38/39), to 99.37 and, potentially, below.

Yes, we are looking for a breakdown in the positive correlation between $/¥ and US Treasury yields.

 

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Thu, 05/29/2014 - 13:53 | 4806426 LawsofPhysics
LawsofPhysics's picture

Sure he is. Caught short BofA?  The U.S.S.A. Cannot afford higher rates, period.

Thu, 05/29/2014 - 13:55 | 4806439 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

The squid has muppets. What is BofA's term? 

Thu, 05/29/2014 - 13:59 | 4806459 NotApplicable
NotApplicable's picture

Tyler, you forgot the "Thursday Humor" label!

Thu, 05/29/2014 - 14:07 | 4806488 flacon
flacon's picture

Buy Bondage. Buy Stawks. Both go up together.

 

Have I missed the boat on buying SPY call options? Still time to make "money" in this "recovery"?

Thu, 05/29/2014 - 14:22 | 4806597 Stoploss
Stoploss's picture

Use technicals in a rigged market.

Brilliant!

Thu, 05/29/2014 - 14:55 | 4806804 daveO
daveO's picture

That same idea hit me when I looked at first chart, trying to remember when 'taper talk' began.

Thu, 05/29/2014 - 14:48 | 4806751 Headbanger
Headbanger's picture

Good question Vampy..

Smurfs maybe?

 

Thu, 05/29/2014 - 13:56 | 4806442 Sudden Debt
Sudden Debt's picture

Agree 100% with you, won't happen. Ever again for at least a decade.

Thu, 05/29/2014 - 14:00 | 4806464 LawsofPhysics
LawsofPhysics's picture

Oh the delicious irony of BofA being the next PD to be sacrificed...

one can dream can't they?

Thu, 05/29/2014 - 14:22 | 4806593 disabledvet
disabledvet's picture

they suck. they really, really, really do.

makes me laugh that Tylers Durden reprint their propaganda here...although i'm sure they're well compensated for doing so.

Of all the mismanaged "Jamie Dimon style" Banks this one was the worst. Countrywide financial is easily the most corrupt financial institution in US History.

Thu, 05/29/2014 - 14:29 | 4806631 Bay of Pigs
Bay of Pigs's picture

My brother is an insurance investigator. Amazingly, they are still doing Countrywide cases.

Thu, 05/29/2014 - 13:58 | 4806451 Grande Tetons
Grande Tetons's picture

The bond bear will emerge from hibernation lick his balls and get shot in the head by the Fed.

Thu, 05/29/2014 - 13:59 | 4806457 OnceandForever
OnceandForever's picture

Correct answer.

 

Thu, 05/29/2014 - 13:59 | 4806458 OnceandForever
OnceandForever's picture

Correct answer.

 

Thu, 05/29/2014 - 14:08 | 4806502 CrashisOptimistic
CrashisOptimistic's picture

I heard a CNBC radio host ask questions of a booming bull looking for vibrant growth "later this year", and you could see that she stumbled into the questions and didn't realize until it was too late that she had damaged the narrative.

"So . . . what's the engine?  What is going to change that will generate this explosive growth you see later this year?"

"Oh, hmm, the consumer!  The consumer hasn't been buying.  We saw retail sales last week and that's just not normal.  It's going to reverse!"

"Why?"

"Never bet against America!  It will change starting in July!"

"But why?  What's going to make that-- . . . oh, sorry hold that thought, we have to go to break."

Thu, 05/29/2014 - 14:34 | 4806659 walküre
walküre's picture

The "America, America Over All" hubris is nauseating. It is so engrained into the brains of some our most decorated and renowned professionals and it is so wrong.

"Never bet against America!  It will change starting in July!"

There is simply no basis for it anymore, maybe never was. Illusion and propaganda, that's all.

(Deutschland, Deutschland über alles...)

...we all know how that ended

I was listening to a panel discussion on the situation with Russia and the Ukraine a few weeks back. The speaker of the State Department just kept repeating ad nauseum how important and vital the role of America is in the world and if it wasn't for America, the world would crumble and fall into a deadly apocalypse. Ok, that last part are my words as interpretation of the picture this speaker was trying to portray.

The world will still be turning, the sun will still rise in the East and set in the West long after the "1000 Year" American Reich has expired.

 

Thu, 05/29/2014 - 15:02 | 4806842 daveO
daveO's picture

Of course, it will turn up in July. 2nd Q earnings will be compared to Q1. They will declare a humongous recovery in motion.

Happy Days are Here Again! Hey, it worked for FDR. 

Thu, 05/29/2014 - 16:04 | 4807097 Rusty Nayle
Rusty Nayle's picture

I hear Uncle Janet is a pretty good shot

Thu, 05/29/2014 - 13:59 | 4806452 OnceandForever
OnceandForever's picture

Garbage...the long term trend is still down. We will see rates as low as rates in Japan. Our $18 Trillion in debt will not alow the FED to raise rates for a generation ...we cannot afford it. Likewise, Japan has $15 Trillion in debt and they have rates under 1%.  Duh?

 

BAC and all the banks havebeen short and dead wrong for years. Next ???

Thu, 05/29/2014 - 13:58 | 4806453 OnceandForever
OnceandForever's picture

Garbage...the long term trend is still down. We will see rates as low as rates in Japan. Our $18 Trillion in debt will not alow the FED to raise rates for a eneraion ...we cannot afford it. Likewise, Japan has $15 Trillion in debt and they have rates under 1%.  Duh?

 

BAC and all the banks havebeen short and dead wrong for years. Next ???

Thu, 05/29/2014 - 14:47 | 4806744 walküre
walküre's picture

The writing has been on the wall for a few years now. Rates can only rise or in other words "reset" if the debt gets "reset" as well.

If debt = money than debt = wealth. Debt gets cut, wealth gets reduced.

The fat on the top is too heavy. We need to trim down collectively or we will not be able to compete with the rest of the world where the overheads are operating and living on smaller budgets.

The richest class of people is still living in the US. Sorry if that is YOU. The wealth that's been building for generations needs to be distributed, cut in pieces or simply written off.

The debt/wealth is choking every potential growth opportunity. What the country needs in order to accomplish this wealth confiscation is strong and visionary leadership. That's a long ways off, I suspect.

In the meantime we will experience wealth cuts and debt restructuring on smaller scales and in the periphery of the global debt behemoth. Those are like tiny cosmetic incissions where the bleeding can be stopped quickly and the cancerous growth can be stalled a few months, maybe years.

Eventually though the debt cancer will overtake the host and that's the end of it.

In oncology terms I would say the world is in stage 3 right now where the debt cancer has metastasized to a degree where radical procedures are necessary. The five year outlook and chance of survival is below 50% imo.

TIFWIW

Thu, 05/29/2014 - 13:59 | 4806455 AccreditedEYE
AccreditedEYE's picture

This website has done a fantastic job of illustrating why it is ALWAYS best to "short" BofAML... in other words, if you're short bonds you're world is about to get even more horrific than you already thought it was. 

Thu, 05/29/2014 - 14:00 | 4806463 uncle_vito
uncle_vito's picture

Bond yields will continue to drop.   Count on it.

Thu, 05/29/2014 - 14:03 | 4806466 Chief Wonder Bread
Chief Wonder Bread's picture

What long-term bear trend? ha fucking ha.

Thu, 05/29/2014 - 14:09 | 4806512 NotApplicable
NotApplicable's picture

Must be that lack of "quality collateral."

Thu, 05/29/2014 - 14:52 | 4806776 Chief Wonder Bread
Chief Wonder Bread's picture

You mean the kind of 'quality collateral' that's a short-term factor, that kind of 'quality collateral'?

Thu, 05/29/2014 - 14:03 | 4806477 Tjeff1
Tjeff1's picture

Look for inverted curve 5 yr to 30 yr.

Thu, 05/29/2014 - 14:05 | 4806487 Dingleberry
Dingleberry's picture

I'm still looking for the dreaded bond vigilante.

If anyone see one, let me know.

Thu, 05/29/2014 - 14:10 | 4806521 NotApplicable
NotApplicable's picture

Does anyone remember the name of the company in Belguim behind all of their Treasury purchases?

My Google-Fu is weak today.

Thu, 05/29/2014 - 14:10 | 4806524 Winston Churchill
Winston Churchill's picture

Euroclear

Thu, 05/29/2014 - 14:45 | 4806730 NotApplicable
NotApplicable's picture

Thank you. I'm pretty sure that's a name I don't want to forget...

again!

Thu, 05/29/2014 - 14:10 | 4806522 nope-1004
nope-1004's picture

None left.  The term is used by the financial whores to make the public believe there is a pact of do-gooders out there that would right any wrong, if there was a wrong.  Since the bond vigilante hasn't emerged, there must be no wrong...... right?  It's a lie, just like the Fed.

Fucking US is 100% crony and controlled by the financial whores.  BofA is a walking zombie - unless the Bush family intends to bail them out for the third time in 12 years.

 

Thu, 05/29/2014 - 14:33 | 4806649 Bay of Pigs
Bay of Pigs's picture

Those guys were thrown overboard years ago with cement shoes on and they sunk to the bottom of the ocean.

Thu, 05/29/2014 - 14:07 | 4806494 Winston Churchill
Winston Churchill's picture

We have crossed the Rubicon(or Zambesi).We are going full retard ahead

Zimbabwe style until the dollar becomes worthless.

No wonder Team east has backed out of the SDR plantation plan.

Thu, 05/29/2014 - 14:09 | 4806503 Boston
Boston's picture

Yields are so stretched to the downside that some sort of bounce back up would be very normal. But I'd be very careful about calling this a resumption of the longer-term bear trend in prices, when the really long-term, and more important, trend in prices (ie. from the early 1980's) is still bullish.

Thu, 05/29/2014 - 14:09 | 4806516 all-priced-in
all-priced-in's picture

I don't get the confidence some seem to have in - the government & the FED ability to some how control interest rates.

Do you think they can just print up trillions more (on top of what they already have) in FRN and buy bonds - and keep interest rates below the inflation rate forever?

I have to still think at some point the wheels come off.  

How many failed UST auctions will it take before people wake up? 

 

 

 

 

Thu, 05/29/2014 - 14:39 | 4806632 LawsofPhysics
LawsofPhysics's picture

It the "cleanest dirty shirt" and all that.

 

When does it change?  Simple, when either 1) supply lines break or 2) people start voting with their feet or wallet.

Folks in Japan have been asking this for 40+ years...

Thu, 05/29/2014 - 15:14 | 4806902 daveO
daveO's picture

If all dollars were repatriated overnight, they'd still buy all US debt and keep rates near zero. Never mind, astronomical inflation and widespread shortages. See the USSR in the 80's. Only at that point would Americans demand an end to the FED, and a return to 'market' rates.

Thu, 05/29/2014 - 15:14 | 4806903 daveO
daveO's picture

If all dollars were repatriated overnight, they'd still buy all US debt and keep rates near zero. Never mind, astronomical inflation and widespread shortages. See the USSR in the 80's. Only at that point would Americans demand an end to the FED, and a return to 'market' rates.

Thu, 05/29/2014 - 14:10 | 4806520 JustObserving
JustObserving's picture

There are some so blind that believe US markets are fair and free.  Were you on Mars for the last 5 years, Mr Curry, that you missed the daily manipulation of all US markets - bond, stocks and commodities? 

Thu, 05/29/2014 - 14:11 | 4806529 NotApplicable
NotApplicable's picture

He's too busy trying to keep BofAML "solvent" to notice.

Thu, 05/29/2014 - 14:11 | 4806535 Godisanhftbot
Godisanhftbot's picture

 wheres that moron Tepper?

Thu, 05/29/2014 - 14:12 | 4806542 Fuh Querada
Fuh Querada's picture

Anyone trusting fancy technical analysis trendcurves, waves, bands, levels, penetrations, Fibonaccis, moving averages and associated bullcrap in centrally planned "markets"deserves to get  their balls handed to them on a plate.

Thu, 05/29/2014 - 14:21 | 4806583 Winston Churchill
Winston Churchill's picture

Recycled as earrings.

Thu, 05/29/2014 - 14:13 | 4806543 TrumpXVI
TrumpXVI's picture

There will be another wave of "safe haven" buying of U.S. Treasury debt.  This will go on for quite a while yet....especially once the equity bubble pops....which it will, at some point.  I doubt we're anywhere even close to the "loss of confidence" in U.S. debt that will be necessary to reverse this major trend. The global economy will continue to deteriorate and there's just too much money with nowhere else to go....it's totally stupid...and wrongheaded....but it will continue (in fact that's prolly WHY it will continue!)

Thu, 05/29/2014 - 14:27 | 4806621 disabledvet
disabledvet's picture

When it comes to price "anything can happen."

The question BofA is not what the crystal balls says but "can they handle the volatility?"

Simply put i don't think they can last five seconds if we get a massive vix explosion here again.

Thu, 05/29/2014 - 14:48 | 4806748 buzzsaw99
buzzsaw99's picture

the dearth of trading volume has to hurt

Thu, 05/29/2014 - 19:37 | 4807877 deflator
deflator's picture

 I thought slaying muppets with macro BS was GS territory?

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