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Treasury Yields Near 2014 Lows As S&P Hits Record Highs

Tyler Durden's picture




 

Today's dislocated markets are brought to by the number 4,398,201,000,000 and the word "Yellen"...

 

 

Chart: Bloomberg

 

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Wed, 07/23/2014 - 12:40 | 4993555 Deathrips
Deathrips's picture

Price fixing fucks the fixer in the ass ....eventually.

 

RIPS

Wed, 07/23/2014 - 12:52 | 4993641 Hero Protagonist
Hero Protagonist's picture

So does the math work like this?

Step 1: The Federal Reserve creates roughly $3.5 trillion out of thin air ($4.3 - ($800 billion before the crisis).  

Step 2: Fed takes said $3.5 trillion and buys bank's bad assets (e.g. mortgages) and exchanges them for Treasuries.

Step 3: Bank can use treasuries as collateral to purchase/lend whatever?

Wed, 07/23/2014 - 13:08 | 4993722 flacon
flacon's picture

I will become a Keynesian when they can make bond prices rise alongside rising bond yields. That is when we know the oceans have turned to lemonade.

Wed, 07/23/2014 - 13:16 | 4993757 Capitalist
Capitalist's picture

No that's wrong. The Fed swaps treasuries and MBS for bank reserves which cannot leave the banking system unless converted to physical cash.

Banks now have the newly created reserves as an asset and a deposit as a liability. The newly created deposit is an asset to the party (e.g. pension fund) that sold its treasury/MBS to the bank.

All explained here: http://www.bankofengland.co.uk/publications/documents/quarterlybulletin/...

 

 

Wed, 07/23/2014 - 13:29 | 4993856 yrad
yrad's picture

Nice link, thanks.

Wed, 07/23/2014 - 12:40 | 4993563 Capitalist
Capitalist's picture

All that inflation... oh wiat.

Wed, 07/23/2014 - 12:42 | 4993567 RiskyBidness
RiskyBidness's picture

The Big Short will be back again!  Be patient traders!!  

Wed, 07/23/2014 - 12:45 | 4993598 wallstreetapost...
wallstreetaposteriori's picture

The "BIG" short is in the equity markets.....  Bond yields just reflect to truth to this economic scam.

Wed, 07/23/2014 - 13:08 | 4993719 TheRideNeverEnds
TheRideNeverEnds's picture

If you like selling em here @1980 you are going to love selling em in a couple years @4000.

Wed, 07/23/2014 - 12:42 | 4993568 Aknownymouse
Aknownymouse's picture

How many times do I have to say it?? This is minor inflationary noise that I can take care of with a bunch of macroprudential scientific steps within 15 minutes. Said Yellen.

Wed, 07/23/2014 - 12:42 | 4993570 Quinvarius
Quinvarius's picture

Admiral Ackbar knows what is up with the S&P 500.

Wed, 07/23/2014 - 12:44 | 4993581 NoDebt
NoDebt's picture

"It's a TRAP!"

Wed, 07/23/2014 - 12:54 | 4993646 1stepcloser
1stepcloser's picture

"It's a TARP!"

 

Fixed for ya!

Wed, 07/23/2014 - 13:00 | 4993680 Dr. Richard Head
Dr. Richard Head's picture

It just occurred to me that a tarp, in real life at least, is something used to cover up something else.  Pretty appropriate now that I think of it.

Wed, 07/23/2014 - 13:16 | 4993779 juggalo1
juggalo1's picture

You just now realized why they called it the troubled asset relief program?  You didn't realize that was intentional?

Wed, 07/23/2014 - 13:01 | 4993685 Dr. Richard Head
Dr. Richard Head's picture

Duplicity

Wed, 07/23/2014 - 12:44 | 4993585 fonzannoon
fonzannoon's picture

the 30yr has firm support at 0

Wed, 07/23/2014 - 12:47 | 4993599 1stepcloser
1stepcloser's picture

if you give the government money for 30 years  with eventually no coupon... is that considered a Tax?  Just wondering..

 

or is it only a tax when the loving government converts your IRA into them?

Wed, 07/23/2014 - 13:00 | 4993664 hedgeless_horseman
hedgeless_horseman's picture

 

 

if you give the government money for 30 years  with eventually no coupon... is that considered a Tax? 

Good question.  I think if you are a bank, and you use the treasury you purchase as collateral for 30 years, and you lend 10X the amount to customers, and your trading desk leverages the collateral 100x for 30 years, and the government agrees to bail you out if you should ever lose money, then it is not so much a tax as it is a token price to pay to keep up appearances that the US Treasury and the banks are not running a racket, pure and simple.

Wed, 07/23/2014 - 14:13 | 4994113 disabledvet
disabledvet's picture

If the Government charges you 18 percent interest on your back taxes is that usury?

Wed, 07/23/2014 - 12:56 | 4993666 NoDebt
NoDebt's picture

Back in the late 70s/early 80s, when treasuries were paying double digit yields, people in the investment business referred to them as "instruments of financial confiscation" (I'm not joking, they did).  At the time it looked like inflation would continue to go nowhere but up and eat those things alive.  Why not?  Nixon had closed the gold window only a few short years before and it looked like the old Dollarino was headed for an inflationary spiral/devaluation.  None of the "experts" would advise people to buy Treasuries.

And then something happened.

 

Wed, 07/23/2014 - 12:48 | 4993607 Grande Tetons
Grande Tetons's picture

If it breaks zero to the downside I will start pissing while doing handstands. 

Wed, 07/23/2014 - 13:14 | 4993763 Colonel Klink
Colonel Klink's picture

Same place the dollar has firm support at too on a long enough timeline.

Wed, 07/23/2014 - 12:47 | 4993603 buzzsaw99
buzzsaw99's picture

oil and gold tripled over the past dozen years but the cpi stays at 2.1% always. lulz

Wed, 07/23/2014 - 12:52 | 4993639 Capitalist
Capitalist's picture

Because households cosume a basket of goods only comprised of oil and gold. Isn't that what CPI is? Just oil and gold???

Wed, 07/23/2014 - 12:54 | 4993656 buzzsaw99
buzzsaw99's picture

capitalist? what a funny name. like bigfoot, the mythical yeti.

Wed, 07/23/2014 - 12:48 | 4993613 RiskyBidness
RiskyBidness's picture

I will be eventually shorting TLT.

Wed, 07/23/2014 - 12:50 | 4993620 buzzsaw99
buzzsaw99's picture

and i will be handing your ass to you

Wed, 07/23/2014 - 13:30 | 4993826 Keltner Channel Surf
Keltner Channel Surf's picture

As the saying goes:  like trying to pick up supermodels in front of a steamroller.

Wed, 07/23/2014 - 13:02 | 4993619 AccreditedEYE
AccreditedEYE's picture

Today's intra-day equity benchmark action brought to you by Algorithm Autopilot. Need to churn the market, waste time to consolidate a "managed" rip higher and do it with as little volume as possible? Algo Autopilot will do all this and MORE! Our patented "shark tooth" pattern will keep Bulls AND Bears guessing what you are really up to. Pick it up at your local Central Bank Supply Store (aka BIS) today!

Wed, 07/23/2014 - 13:09 | 4993734 Lewshine
Lewshine's picture

Bully for you AccreditedEYE,

Finally someone who understands the action. One more thing though, the algorithm's are programmed a day in advance. Then, a "classifeid memo" is sent to those in the inner circle, at days end for tomorrow's action.

Futures and option action in "after and pre market" tell the story...Explains the NO VOLUME ramps during trading hours.

Wed, 07/23/2014 - 12:49 | 4993621 ebworthen
ebworthen's picture

Bubbliicious!

This flavor I'm pretty sure:

http://lululuber.files.wordpress.com/2011/01/paradise-punch.jpg

(link opens in new window/tab)

 

Wed, 07/23/2014 - 12:49 | 4993625 Amish Hacker
Amish Hacker's picture

Golem xiv has an interesting post ( http://www.golemxiv.co.uk/2014/07/small-thoughts-go/ ) today. One of his main points is that financial markets no longer measure economic fundamentals, they track political ones. Stock markets are measuring the "grip of the global overclass on the levers of politcal control," not the health of the economy. Since the markets are now managed to PREVENT true price discovery, stocks and bonds can both rally, utterly divorced from economic fundamentals.

Wed, 07/23/2014 - 12:55 | 4993658 NOTaREALmerican
NOTaREALmerican's picture

There was a article on here yesterday from another site, saying roughly the same thing.  It's all about the top 10% "management class" now; and how well they manage the economy to enrich themselves. 

Wed, 07/23/2014 - 13:03 | 4993692 Dragon HAwk
Dragon HAwk's picture

So when their hands slip off the Levers.  What Happens ?

  wait don't they call that a Dead man's Switch...  :)

Wed, 07/23/2014 - 12:52 | 4993636 RiskyBidness
RiskyBidness's picture

Hey Buzz.....did not mean tomorrow or next month.  But it will be a great short!!

Wed, 07/23/2014 - 13:00 | 4993681 Dr. Engali
Dr. Engali's picture

You will never make any substantial money shorting this market. You must understand that when the rug is pulled or a few insiders will be able to capitalize. For the rest of us proles the shorting of stocks will be outlawed.

Wed, 07/23/2014 - 12:53 | 4993647 Colonel Klink
Colonel Klink's picture

When this thing comes apart it's going to be E P I C!

Wed, 07/23/2014 - 12:55 | 4993651 Keltner Channel Surf
Keltner Channel Surf's picture

Why did stocks, especially small caps, correct smartly in the time it took for Tyler to post this?  Well, the answer is . . . the nearly $6 BILLION in collective QE$s over today and tomorrow, which I believe is the largest two-day candy machine in months, that had goosed stocks this morning, wore off. As no one wants to open new longs given events, primary dealers are being bribed by our Fed to tickle shorts, cuz that’s where the most money is presently (they own too much to tank it just yet).   So, shorts before 11 aren’t advisable when POMO > $2B, but quick post-POMO crashes are common (I just covered a noon Russell short, missing the ride up).  With the RUT at its HRLY 20-MA, machines are no doubt battling to bounce strongly, let's see what they've got under the hood.

Wed, 07/23/2014 - 13:00 | 4993677 ziggy59
ziggy59's picture

Thats 4,300,000 Million Dollars...
Insanity Rules!!

Wed, 07/23/2014 - 13:11 | 4993750 GFORCE
GFORCE's picture

Today and tomorrow are large POMOs. Once that's over we may see a reversion to yields.

Wed, 07/23/2014 - 13:13 | 4993755 ekm1
ekm1's picture

Treasuries are not edible, neither can they be used to fuel a car.

 

Triple Lehman will be manually triggered, sooner or later, otherwise world dumps USD and goes barter as it is slowly occurring

Wed, 07/23/2014 - 14:21 | 4994155 oddjob
oddjob's picture

How did your shoes taste?

Wed, 07/23/2014 - 13:12 | 4993756 Soul Glow
Soul Glow's picture

Yellen is a banksters best friend.

Wed, 07/23/2014 - 13:16 | 4993786 orangegeek
orangegeek's picture

yellen is a bankster - and has no interest in benefiting anyone other than a fellow bankster

 

yellen could care less about jobs and the economy - its modus operandi is to juice the banks and juice the markets

Wed, 07/23/2014 - 13:29 | 4993858 QE49er
QE49er's picture

Dow 200,000

Bread $50

Gallon of Gas $400

Gold - still stuck at $1,300

When the whole thing comes crashing down, don't ask me why

Wed, 07/23/2014 - 13:32 | 4993874 Duffy
Duffy's picture

Who is buying treasuries?  Seriously...

 

If I were Goldman, and able to get a billion at whatever the fuck - free...  and get a 2% return, which isn't even beating inflation, even for honest Keynsians, I'm still essentially getting paid to accept free money... there's really no relative risk at all.

 

but if you're some guy making 100k, why go treasuries instead of some money markets/cds, or I dunno...  something else?  In other words - who, who doesn't have access to the discount window, is buying these fucking things these days.  I'm really asking - not even sure how to google this clusterfuck of a question to you fine folks of Das Hedge...

 

Wed, 07/23/2014 - 14:09 | 4994092 AnnndItsGone
AnnndItsGone's picture

Well, i could sell BUNDS and buy Treasuries, resulting in a fucking bulshit non risk profit.

At least, that`s what market is thinking.  

Wed, 07/23/2014 - 14:01 | 4994057 AnnndItsGone
AnnndItsGone's picture

What is curious is that if everything colapses (And i`m not talking about european geopolitical crisis, i`m talking about equities) everyone will start pushing yields down. So, at the same time people are buying equities they are seeking for a so called safe guard assets, commonly knowned as Treasuries... 

So, there is only one way yields could follow regarding an early hike (and if that occurs, it would be awesome from a buyer perspective), up and above.

I`m just kiding, just wanna se things blowing up.

Wed, 07/23/2014 - 14:05 | 4994070 monopoly
monopoly's picture

And even if they notice, they just do not give a shit. Up we go, beyond words. The twilight zone.

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