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Treasury Yield Curve Flattens Dramatically, Below Lehman Levels
The reaction to today's blockbuster noise-ridden jobs data is muted in stocks but bonds are sending some complicated and uncomfortable signals. 2Y yields are 6-7bps higher and 30Y yield are now unchanged (havingbeen 4-5bps higher) as the market prices in short-term Fed action and the implicit medium-term economic weakness expected. This 6-7bps flattening of the 2s30s curve has crushed the spread to 234bps - below levels seen as Lehman failed and near Summer 2012's cycle lows. But we are sure 2015 will be the year that rates rise... right?
The post-payrolls reaction...
and the crushing blow to the yield curve...
Charts: Bloomberg
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Seems like the FED just wants out at any cost, even if they have to fudge BLS data. Rate hike in december?? If the plan is to start a war with Vlad, that would surely push him over the edge, with oil in the 40 range.
So is this an indication that rates should move higher or lower?
Short term higher since this reflects the FED raising rates but long term rates reflect economy so they continue going lower. Curve will invert soon.
Which traditionally indicates a coming recession. But did we ever come out of the last one?
wrong. long term rates are indicative of NOTHING.
Fed hike rates next year????
HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA!!!!!!!
[Over/Under? I'll take the Under please...]
Rather down to -1% next year.
Paper money is unfit for a world of high crime and low inflation
By Kenneth Rogoff
Abolishing physical currency would achieve two valuable objectives, writes Kenneth Rogoff
http://scholar.harvard.edu/files/rogoff/files/paper_money_is_unfit.pdf
"Abolishing physical currency" ?? I think there is better case for abolishing Ken Rogoff.
yeah, because with a war with Vlad, oil will stay at 40. Sure. And the Chinese will just watch. Sure
Rates go up??? That's crazy talk!!!
Raise rates in 2015...., yeah right. The ten year will be below 2% in 2015.
is it possible rates will raise themselves despite the feds backdoor buying? the key is the drive to monetize, without the policy of expanding government debt, there is no reason to them to enter the market
Rates can only go up when the FED owns all the US debt. Then, the market would use a new benchmark, which the FED would immediately buy up! And, of course, the minute they shrink the US budget, banks will be swamped with deflation(bad loans). Hence, John 'Boner' already announcing that he won't shut down the gov. over spending. Surrendering 2 months in advance!
treasury bonds are for suckers. to risk ones capital for the measly interest they offer is a losing proposition.
Bought 2500 shares TLT at 120.63, flipped for 121.50. All this morning.
I think I'll go suck on a nice ribeye for lunch.
I wish I could be one of those stock market picker guys
I do my best when I am still drunk from the night before.
Give it a try.
And really, it is a sign that the end is near when I am making easy money.
I've made that joke for 45 years. Luckily it's been a joke, that is.
It's been tough. But you gotta savor the good days.
I am right now making a couple of bowties from hundred dollar bills for a good dude with stage 4 cancer.
Actually, my clients have done well this year thanks to the total return this year in treasuries.
TIPs go at a discount at auction, you can buy $1000 worth for $950 dollars, its a note so the principal is safe, and if and when inflation picks up you collect those payments.
Just can't get it up.
Say it with me now, boys and girls: Bullish!
'Markets priced-in Fed actions'.....how can you do that when you can't know what crazy shit some Fed geezer will say in the next hour? 'Priced-in' my ass.
In olden times the flattening curve would be seen as leading indicator of economy slowing. Fed raising short rates to brake the growth. Despite the jobs numbers people realize underlying growth is not robust, neither is inflation, so doesn't make sense that Fed is tapping the brakes.
Thanks to fed we get to be in uncharted territory, backwards land, with the Economy leading the curve. Lower.
Yes indeed. Now, regarding infinitie "growth" in a closed system with finite resources...
well, good luck with that.
in newer times its good for the economy, it means government has to pay less to finance its spending. employment has a structual problem and i don't know why government doesnt make corporate america pitch in a little instead of subsiding share buybacks and M&A.
It's a desperate attempt to salvage the Petro Dollar. Gold's on sale until it fails.
The Federal Reserve raises interest rates and the Treasury issues more and more debt to cover the payments. Then the Federal Reserve turns around and simply keeps printing more and more. This all goes on virtually at the same time. No one dare call anyone out on this because when the ponzi stops working a certain crash of the monetary system exists.
When as a nation you can just print a trillion dollars to cover debt recently issued and no one cares as just happened in November that should tell everyone all they need to know. Raising rates is not going to stop them from printing but it may accelerate the process even a bit more to create that inflation they seem to desire for us all.
Ok great yields have flattened some more.. increasing your convexity risk... who cares... What has happened to the Repo Rate ?
Federal Reserve thought they had us hoodwinked with the effective zero % short term rates...thought we'd never see the curve flatten again.
They were wrong. Look for next QE to target 2-year paper to mask this negative signal.
Moving down the Treasury curve, one bond at a time. First, it was the 30, then it was the 10, then the 5-7. Next, you're right - the 2-year note.
When the Fed is forced to buy 3-month paper, the S&P will likely be at/near 2400. You'll have three months to get your affairs in order and make a killing on the last few hundred of S&P points.
Good Night Irene
The ongoing depression take is of course correct. We have 7-10 years left before decent growth will return due to demographic factors. The same demographic factors allowed us to predict the financial crisis and real estate crash 18 years before it happened.
The tightrope walk between inflation and deflation has been successfully walked so far. The next three years are the most crucial and dangerous,
Given 70 years of political stupidity coupled with demographic factors we have come through the first part of the depression as well as can be expected, in fact better than I expected.
Can the Fed keep all the balls in the air for 3 more years? It looks increasingly likely that it can.
Having prepared for all contingencies, it's a cherrypicking game now, making money where possible and keeping plenty of powder dry.
Good luck everyone, interesting times are interesting!
Decent growth (define please) in 7-10 years. LOL. Growth ended in USA/Europe in 1970.