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10 Year Yields Plunge: A Very Confused Wall Street Tries To Predict What Happens Next
There was some serious fireworks in the Treasury market overnight, and especially just before the PBOC decided to intervene in the market not once but twice to undo at least some of the devaluation it caused earlier in the trading session. In fact, at one point the yield on the 10Y tumbled as low at 2.05% before levitating higher courtesy of Beijing (which may well have dumped some TSYs just at that moment to prop up the CNY), even as across the pond Germany's 2 Year bond dropped to a fresh record low.
So what happens next? Well, it's not like the sellside is very useful in actually providing actionable advice when something not in the script happens, but for the record here, courtesy of Bloomberg, is what the 'experts' are saying:
FTN (Jim Vogel):
- “On paper, the last two weeks resemble the panicked rally of January. It will take several days to assess each bond market component for a full comparison, but that’s the headline conclusion,”
- “The potential difference is that even at the worst of the oil collapse this winter, many global investors kept faith that central bank easing would provide sufficient stimulus for a global turnaround in 2H 2015”
- “On a risk-adjusted look ahead at the next two months, a bull steepener this week is unlikely to hold”
BMO (Neil Bouhan):
- “If the Chinese currency revaluations have the UST market headed in a bullish direction, then we surmise it’s largely the result of the uncertainty behind the PBOC’s medium-term goals”
- A good JOLTS report “will help push yields back toward the pre-CNY fix levels, which is around 2.14% in 10s”
Credit Agricole (David Keeble):
- “This afternoon, we would sell the 30Y area vs 10s because we do not like the 30Y auction”
- “It will benefit least from the large coupon and redemption payments,” has “no strong buyer outside of the domestic mutual funds, and dealers already have USD14n of the sector”
CRT (David Ader):
- “Question now remains” if this “was a one-off move as the PBOC appears to be suggesting, or will the currency be allowed to depreciate further in the near- term”
- “This added to the bullish underpinnings for the market” is likely to “limit any significant back-up in yields for the time being”
ED&F Man (Tom di Galoma):
- “The focus today will be the demand for the 10yr note auction at 1pm. The market at this point is overbought and would suggest the 10yrs will sell off prior to the auction”
Marty Mitchell (independent):
- “We think that the 10yr reached an extreme at 2.04% overnight and, while this level could very well be tested again, the market feels like it is getting overextended up at these levels”
- “We expect that a near-term high will be put in somewhere between 2.04% and 1.99%, but it all hinges on whether more turmoil develops around China’s devaluation or if things can stabilize”
RBS (Bill O’Donnell):
- “The disinflationary aspects of this currency depreciation will make the pace of rate hikes all the more benign,” and “if the rumors are true that there is internal pressure for a 10% devaluation of the Yuan by year-end, it could be very difficult for the Fed to reach its 2% target rate over the medium term”
TD (Gennadiy Goldberg):
- “September rate hike was never a slam dunk decision for the Fed, and the greatest immediate impact of CNY depreciation on the Fed would come through the volatility channel”
- “If global markets continue to be rocked by ongoing depreciation over the next several weeks, the Fed could certainly consider the impact of adding fuel to the fire with a September rate hike”
Then again, considering all of these strategists were 101% confident the 10Y would have a 3% before a 1% handle, feel free to ignore everything they just said.
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War. That's what.
So the Chinese are selling T-Bills again? Since when does T-Bills sale = supporting currency? I mean, it could be the reason, but China has FX reserves for that.
Me thinks they want to rid themselves of T-Bills without spooking the markets by giving the excuse of defending the Yuan.
Before yesterday it was $1 Billion a day, which is 3 years before the T-Bill holdings reach zero.
Maybe my tin foil hat is on too tight today?
I'm not sure even the Chinese know what they're doing, but it makes the soap opera much more exciting.....
Yields go down when the cost of principal increases, don't they?
IOW it be a seller's market.
So, if the cost of principal is higher, is it a bad thing, or a good thing?
And lay-offs. Actually, I'm interested to see just how quickly the (mass) layoffs begin this cycle as opposed to 2008. I have a hunch the trigger finger is itchy.
I once asked a Chinese colleague in Shanghai what she would do if she was able to invest her money outside China and she said "I'd buy a house in San Diego."
Where, exactly, do we think that "3.99 Tril" is headed? Of course that's just the savings in the government's own hands.
And as the Russians found out, if you sell the foreign currency and buy your own you are contracting the domestic money supply. Putin nearly collapsed his real economy before he realized that foreign currency was nearly useless to him. (props to Putin for an attitude of trial-and-error, though. OUR economists are never wrong, it seems.)
China is much more likely to turn their "investor class" loose on the world to keep them quiet.
That wouldn't be so bad, but Japan ran current account surpluses.
No one is paying attention to America's unfunded liabilities:
"Our country is broke. It's not broke in 75 years or 50 years or 25 years or 10 years. It's broke today," he told the Senate Budget Committee. "Indeed, it may well be in worse fiscal shape than any developed country, including Greece."
And what about official figures showing that federal government debt is "only" 74 percent of GDP? "Unfortunately, the federal debt is not an economic measure of anything, including our nation's fiscal position," Kotlikoff argued. "Instead, the federal debt and its annual change, the deficit, are purely linguistic constructs that reflect how members of Congress choose to label government receipts and payments."
For example, that figure omits the almost $750 billion the government is collecting this year in Social Security payroll taxes from workers and the future Social Security transfer payments these FICA contributions secure, he explains.
"Were we to go back in time and re-label all past Social Security taxes as borrowing, official federal debt held by the public would not be $13 trillion, but $38 trillion, which is 211 percent of U.S. GDP."
In reality we're facing a fiscal gap of $210 trillion, Kotlikoff proclaimed. That's 16 times larger than official U.S. debt, "which indicates precisely how useless official debt is for understanding our nation’s true fiscal position," he noted, and almost 12 times the current GDP of $18 trillion.
http://www.newsmax.com/Finance/StreetTalk/Kotlikoff-GDP-debt-deficit/201...
Laurence Kotlikoff-U S Treasury Bonds One of the Riskiest Securities in the Worldhttps://www.youtube.com/watch?v=RCNfTTVteBE
No one is paying attention to the fact that the US public has the education of children. And the maturity to boot.
How did people not revolt in 2008 when politicians sold out to the banksters? How do the libs no revolt when Obama keeps them in war after war? How do the libs not revolt when the EPA spills waste into clean rivers?
The government is a mask for a greater evil, and the status quo is to like that evil, even worship it.
Do bond yields truly reflect whether or not they expect to be paid back when the currency can be created with a computer? Bond yields are pricing in ad infinitum money creation. The Fed and its member banks can create as much money as they want to buy treasuries and pay the yield on treasuries.
Watching these so called "experts" they always trot out is like watching a bobble head doll.
Go down to the gunshop and invest in Ruger or Smith and Wesson.
If you have to buy on margin, Taurus will get you through the crisis.
Just trying to help.
Escort Gladius. Them Turks make some fairly good equipment...
What is the worst that can happen with an increase in rates?
Stock prices go down? So, unearned gains will dissipate. They never should have existed in the first place. But now there will be bagholders, particularly those with retirement plans.
Other prices will have to increases because the cost of money will go up. Locally made things will become more expensive and foreign made things will become less expensive.
Bring it!!
-Broker
Rate hike imminent because the banks are positioned short of the major indeces. 'Oh, we were obviously mistaken to hike rates, darn it all!' when the bear trend finally gains traction.
“If global markets continue to be rocked by ongoing depreciation over the next several weeks, the Fed could certainly consider the impact of adding fuel to the fire with a September rate hike”..
FUCK OFF
Hey, why not put it another way...
If Mr. Yellen farts after his lunch then the Fed could certainly consider the impact of .... a September rate hike.
If Obama drones any more civilians then the Fed could certainly consider the impact of....a September rate hike.
If Rodham Clinton gets any more uglier then the Fed could certainly consider the impact of....a September rate hike.
If McCain talks any more bullshit then the Fed could certainly consider the impact of....a September rate hike.
If water turns out to be wet then the Fed could certainly consider the impact of....a September rate hike.
If Boehner gets any further up Netanyahus ass then the Fed could certainly consider the impact of....a September rate hike.
If the dollar has a picture of a dead president on it then the Fed could certainly consider the impact of....a September rate hike.
Again, FUCK OFF, you fucking imbecile.
"Corned beef on rye, Swiss cheese, thousand island, and no sauerkraut please."
Eb! Try a skiff of cream cheese underneath the beef on that reuben...it really pops it up, maybe even just a hint of cream horseradish paste with the TI too if you like a little zing without the sauerkraut. Best reuben ever...
What does Dennis Gartman say?
When all the fiat currencies of the world collapse during the next few months they will call for a global one. Don't buy into it, buy silver.
let me guess...auctions today and tomorrow they will claim were really bad bc the bid to cover was lower than average - and no mention (not even "zerohedge") of the fact that these auctions are for $3 billion more than average and so the adjusted bid to cover was actually very good (not that I believe in the bid to cover announced anyway, it can be whatever the boys want to publish).
if not for the NY FED and there merry pranksters our yields would be on par with germany's.
All those clowns in the media have been saying that the Yuan depreciation will force the PBOC to buy treasuries....not likely they will manipulate the markets and then dump more treasuries forcing the Fed to pick up their treasury crap....then they will recycle dollars buy buying gold....
Wait until the devalue the Yuan against gold once the comex is gone...then they become the gold price setter, supporting their populations gold hoarding, and forcing every other brain dead central banker to scramble for gold....that will spell the end of US fiat status....
the dislocation in chinese equities is the excuse to make the next move against the US fiat status...IMF decision was gift.....
10-yr is still at 2.1
I welcome the plunge.
Cows sell at 1.6
I am up over 11% on the ZROZ long bond ETF I bought back in May. As Bush2 would say: Bring it on.
No, not the last of the revaluations and not the last of the T liquidation either.
Chinese to IMF and Fed: "Game on, gwailo!"
Zero Hedge is confused.