2s10s, 30 Year Yield Pancakes As Bernanke Sets Off On Bank Carry Trade Deathwish

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Wed, 09/21/2011 - 14:48 | 1693633 BrocilyBeef
BrocilyBeef's picture

well done, and now for the tea party.

Wed, 09/21/2011 - 14:55 | 1693732 nope-1004
nope-1004's picture

I'm glad this FOMC distraction is over with.  Now we can get back to watching insolvent nations burn, insolvent banks squirm, and fractional reserve bullion banks blow up.

This entire ponzi is on the edge of a cliff.  OpTwist is just a side show.

 

Wed, 09/21/2011 - 14:59 | 1693781 BrocilyBeef
BrocilyBeef's picture

it means no time like the present to buy physical. I bet we'll see silver under $39 before we see it over $43 again.

Wed, 09/21/2011 - 15:06 | 1693839 nope-1004
nope-1004's picture

I actually don't care if it hits $20..... I've got a 10 year horizon and I KNOW it will be $250 at some point in the future.  The tone and MO is set:  Banks are insolvent and governments broke.  What else does one need to know about where fiat is headed?

Whether it hits $39 or $37 in the next few months... pfffff.

 

Wed, 09/21/2011 - 15:15 | 1693898 DoChenRollingBearing
DoChenRollingBearing's picture

Yep.  Green.

 

The long term future for gold and silver just got even better.  I'm with you, it makes little difference to me the short term fluctuations.  The metals have always been volatile.

But, all these manipulations make gold the BEST store of value around.  Whether it is $1785 or $1700 or $1650 (or even $1900) make no difference!  If you do not own any physical gold (or enough gold), then get busy.

Wed, 09/21/2011 - 15:39 | 1694055 DeadFred
DeadFred's picture

LOL perhaps this wasn't the best day to have puts on TLT. It won't hold at this level so time to double down. I wondered this morning why put prices were declining despite TLT dropping lower. 

Wed, 09/21/2011 - 23:33 | 1695599 Ira Thurby-Wright
Ira Thurby-Wright's picture

I'd think that having put contracts on long term treasuries would be a good thing...? Of course, I mean having written the puts, do you mean "holding" puts to buy? Then, that would be a bad thing.

"means that the entire curve will soon be flat as a pancake, killing Net Interest Margin, aka curve carry for the banks"

Regarding the Fed announcement, as much as it seems a product of much deliberation by the FOMC, I think it went more like a relaxing wine and cheese party and then Ben said, "well, this has been fun. My compliments to the St Louis Fed for making the catering arrangements and thanks to Philly for the table centerpieces. However, I think it's time I should go out there and announce what we all knew for a very long time would happen, that we are irreversibly stuck with low interest rates. If the banks can't borrow from us at sub 3%, they'll all crash. The banks have a bulk of loans out at sub 5% through RE loans at 30 years and the money they lent hasn't even been created yet, so if the treasuries competed for money the banks would otherwise hold as reserves, they'd crash within a year. Before I make the press release, can I have a few volunteers to dissent so that this doesn't look like a cabal?"

Wed, 09/21/2011 - 17:25 | 1694560 eburk
eburk's picture

Definitely, especially if you bought gold in 1980 at $2,500/oz in today's dollars.  What a store of value!

Wed, 09/21/2011 - 16:42 | 1694382 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

$20?  Take it back to the 2008 lows so I can back up the truck.  What a gift that would be!

Wed, 09/21/2011 - 15:08 | 1693863 NeoCapitalist
NeoCapitalist's picture

No need to bet, if you're so sure trade it..

Wed, 09/21/2011 - 16:50 | 1694403 covert
covert's picture

where is the liberty and justice here?

http://covert3.wordpress.com

 

Wed, 09/21/2011 - 14:49 | 1693638 Cocomaan
Cocomaan's picture

Can someone explain what Tyler is talking about, here?

Wed, 09/21/2011 - 14:51 | 1693669 healey
healey's picture

Ya, I don't understand the technical stuff either..i would like an depth explanation on the flattening of the curve and what it's effects will likely be.

Wed, 09/21/2011 - 14:53 | 1693712 dasein211
dasein211's picture

Banks borrow on the short end of the curve and lend on the long end and pocket the difference. If the yields have minimal difference than banks cant make money on the spread.

Wed, 09/21/2011 - 14:54 | 1693731 SGS
SGS's picture

Easy.  BAC is fucked.

Wed, 09/21/2011 - 15:01 | 1693805 Cocomaan
Cocomaan's picture

That explains it very well. Thank you.

Wed, 09/21/2011 - 15:04 | 1693829 Manthong
Manthong's picture

Everybody to Chipolte..

Taco's on me!

Wed, 09/21/2011 - 15:06 | 1693842 Cocomaan
Cocomaan's picture

Pass the Hopium and the hotsauce, please?

Wed, 09/21/2011 - 15:10 | 1693873 depression
depression's picture

Japan 2.0

Wed, 09/21/2011 - 18:06 | 1694753 Dingleberry
Dingleberry's picture

Banks will try and make money other ways. They ain't gonna make enough with rates like this for cars and homes.  Your gonna see fees increase, and they will not want to loan to marginal players because not losing money is the same as not making any (which they can't do, in this environment.) Credit will tighten, also because of Euro-shit.  Credit cards will continue to be essentail, if they can collect. I wouldn't want to work at a traditional bank these days. The Wall Street guys will just revert to trading and hedging, sprinkled with some HFT. You won't have to worry about them.  Sad...but true.

Wed, 09/21/2011 - 14:57 | 1693762 NotApplicable
NotApplicable's picture

Professor Fekete does an excellent job of explaining how a falling interest rate environment destroys capital.

http://www.24hgold.com/english/contributor.aspx?article=1819036178G10020...

It is due to his writings that I expect the entire yield curve to be eventually flattened to zero (if the ruling cartel can last that long), as it is the only path forward for them. Otherwise, debt service costs always create an upper debt limit.

Wed, 09/21/2011 - 15:00 | 1693790 duckhook
duckhook's picture

Thta could happen .It is called hyperinfaltion ,complete destruction of the dollar

Wed, 09/21/2011 - 15:18 | 1693926 DoChenRollingBearing
DoChenRollingBearing's picture

@ NotA  Green

Yes, Professor Fekete wrote a brilliant series of articles on how lowering interest rates destroys capital.  I second his recommendation re reading Fekete, one of the best gold analysts as well.

Wed, 09/21/2011 - 14:52 | 1693682 Stoploss
Stoploss's picture

The Bernank just removed the ability for the banks to make money outside of lending.

Wed, 09/21/2011 - 14:57 | 1693753 nope-1004
nope-1004's picture

Which means they will be forced to start increasing rates or die.

"It was the banks that spurred inflation..... we only removed the support", says Ben in a year or two.

Wed, 09/21/2011 - 14:59 | 1693779 NotApplicable
NotApplicable's picture

You forgot choice C: Nationalized Zombie.

Wed, 09/21/2011 - 15:32 | 1694026 Panafrican Funk...
Panafrican Funktron Robot's picture

My interpretation of this is that lending is officially even more fucked than it was prior to today.  If they weren't lending with the spread wider than it is now, why would they lend with a tighter spread?  

Wed, 09/21/2011 - 14:52 | 1693684 NotApplicable
NotApplicable's picture

ZIRP4EVA!

Banking for profit is dead, and is being replaced by banking for political gain (as politicians do not have to suffer the loss).

Wed, 09/21/2011 - 14:54 | 1693726 ShowMeTheTime
ShowMeTheTime's picture

Like DrivenZ says below, banks need a curve on the rates to make money, if the rates between the 2 year and the 30 year are the same or similar, they can't make money by borrowing short (low rates) and lending out long (hight rates, like a 30 year mortgage).  They just took away how 99% of banks make money.

Wed, 09/21/2011 - 14:57 | 1693765 aquagreen73s
aquagreen73s's picture

You mean they took away 99% of how the banks laundered their balace sheets to show a legitimate business operation. Now when the banks don't implode, the true extent of our centrally planned and controlled economy will no longer be the conjecture of conspiracy buffs.

Wed, 09/21/2011 - 14:58 | 1693769 Quintus
Quintus's picture

Benny has just pissed in one of the TBTFs' main income streams.

Wed, 09/21/2011 - 15:10 | 1693875 Crack-up Boom
Crack-up Boom's picture

He must've stayed at a Holiday Inn Express last night.

Wed, 09/21/2011 - 15:19 | 1693936 DoChenRollingBearing
DoChenRollingBearing's picture

LOL, nice

Wed, 09/21/2011 - 14:59 | 1693774 traditionalfunds
traditionalfunds's picture

Previously banks borrowed short term funds at a low rate and invested the funds in higher paying long term notes. The difference between the higher long rates and lower short rates was profitable. Easy money for them in a sense. Now that opportunity is drying up. Gonna actually have to deliver results through lending activity and other business ops. We all know how those operations are doing.

Wed, 09/21/2011 - 15:01 | 1693809 NotApplicable
NotApplicable's picture

Every single time I go into my credit union, it's a non-stop sales pitch for car loans. It must be the last profit center left.

Wed, 09/21/2011 - 15:45 | 1694091 Kayman
Kayman's picture

5 year loans on a 3 year asset, if you're lucky.  Had a friend with a GM pickup- Chinese wheel bearings crapped out in 6 months-dealer said it was his fault. He said, of course it's my fault, I bought a GM !

Wed, 09/21/2011 - 16:30 | 1694319 deez nutz
deez nutz's picture

real friends don't let friends buy GM. 

Wed, 09/21/2011 - 16:38 | 1694353 DoChenRollingBearing
DoChenRollingBearing's picture

Chinese wheel bearing on a GM pickup...  The depths to which we have descended...

Kayman!  I just wrote an article on bearing manufacturing at my blog.  Drop me a gmail at my name for the link.

Wed, 09/21/2011 - 14:49 | 1693645 papaswamp
papaswamp's picture

Pancake bitchez...and some whipped creamatorium.

Wed, 09/21/2011 - 14:55 | 1693739 Long-John-Silver
Long-John-Silver's picture

I prefer my pancake batter cooked in a waffle iron so fruits and nuts can be flattened and cooked too. 

Wed, 09/21/2011 - 14:50 | 1693652 CitizenPete
CitizenPete's picture

holy fkin shit!  this will not play well with pension funds... no no, not at all. 

Wed, 09/21/2011 - 14:52 | 1693693 flacon
flacon's picture

They have to find some way to kill the elderly....

Wed, 09/21/2011 - 14:54 | 1693711 sodbuster
sodbuster's picture

They already have- it's called ObamaCare.

Wed, 09/21/2011 - 14:56 | 1693742 CitizenPete
CitizenPete's picture

Bernanke, we are sinking   SINKING....

http://www.youtube.com/watch?v=CIQETV30_u8

Wed, 09/21/2011 - 14:50 | 1693657 carbonmutant
carbonmutant's picture

130 down on the Dow.

Wed, 09/21/2011 - 14:56 | 1693702 Grand Vizier
Grand Vizier's picture

Oh my God!  It's armageddon!!!  Cats and Dogs getting along...  What is this world coming to???  Relax and put on your big boy pants!

Wed, 09/21/2011 - 14:54 | 1693719 papaswamp
papaswamp's picture

algos still in disbelief....otherwise it would be down 300-400

Wed, 09/21/2011 - 15:01 | 1693811 fuu
fuu's picture

-130

-80

-110

-90

Some nice price stability there.

Wed, 09/21/2011 - 15:06 | 1693843 junkyardjack
junkyardjack's picture

Finishes + 150

Wed, 09/21/2011 - 15:12 | 1693868 fuu
fuu's picture

Nas already green.

aaaaand it's gone.

or not.

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