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Deja QE2, All Over Again: 2s5s Declines To August 2010 Levels
As we pointed out last week, the broad flattening in the Treasury curve, and especially in the short-end continues, with the 2s5s just dropping to 97.6 bps earlier closing below the 104 support line on Friday. Why is this important? Because as Citi chief technical strategist Tom Fitzpatrick wrote in a note released to clients, this is a "concerning development" as it is one of those "other" metrics watched by the Fed in determining when "intervention" is required (not like Goldman's note from Friday had anything to do with it). He adds: "2/5 broke below this level first week of August last year, the result of increasing guidance that QE2 was on the way. Here we do not have any such guidance and instead the curve reflects increasing concerns with the U.S. economy/slowdown." We may add that since cause and effect do not really matter much, it is only a matter of time before the Fed assumes that the market is pricing in not economic weakness but precisely another QE event and reacts accordingly. Citi concludes: "2/5 decline may continue, and could be a negative augur for stock market." It will be... until the Fed proceeds to do what it does best: monetize. Which, assuming today's debt deal passes before midnight, it will just have gotten permission to do. To the tune of about ~$2.5 trillion.
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Tyler should've posted the deer picture just to be ironic about it. Dominoes are lining up monkeys! The question is has gold priced in QE3? ES certainly has...
Jackson Hole Redux!
A deer covered in oil! What is the Fed going to do about "transitory" food and energy prices?
When gold hits $3000, forget MENA, you'll see political turmoil surfacing in Africa (especially South Africa) & South America as countries consider nationalizing their precious metal resources.
...as opposed to what, the peace and tranquility there now??!
.
With core inflation accelerating further to 1.9% yoy by Q4 2011, and H2 2011 GDP still forecast to pick up, the Fed will not monetize until 2012. Sorry, still have to wait.
I don't think either ES or gold have priced in QEIII. Everyone is too fixated on the debt thing right now. But once this fire is 'out' then Wall Street will focus on the next one. Isn't that always how the markets work?
Wouldn't QE3 need to be at least $5T? It is known that $2.5 is needed immediately, but what about after that is used up? Or am I not looking at this correctly?
you're not even supposed to look at it AT ALL!
Yes that's the spirit! 5T at least! Just go ahead and have Ben ask a 5 year old to tell him the highest number he knows and he'll just print that. "Quazillion isn't a number Timmy, try again"
Ben must be champing at the bit with impatience to see the debt ceiling debate concluded so that he can get the presses rolling again.
QE is not about 'Fighting Deflation' or 'Full Employment' or helping the real economy in any way.
QE is about providing a buyer for the Treasury's shiny new $2.5 trillion in permissible borrowing. A buyer, moreover, who is happy to lose money in real terms every year just for the privilege of holding Timmy's garbage paper.
Do not buy into the "There will be no more QE because clearly QE1 and QE2 didn't work" argument. They worked spectacularly well - it's just that they were not intended to achieve what most people thought they were. Look at how cheaply the US Treasury can borrow money, despite being essentially bankrupt, and gauge for yourself how successful QE1 and QE2 have been.
That's right. It's a bond purchase. Who's gonna do it?
There are great ARB opportunities in the bond market right now!
I got to run to a emergency meeting right now but I will leave you with this link. Join me in Israel to see Glenn!
http://www.glennbeck.com/2011/03/29/beck-i-stand-with-israel/
Your ARB's can earn you a free trip.
Traitor sellout Zionist Glenn Beck who supports bailing out banksters, you should be ashamed of yourself for supporting such a carnival barker Mormon fraud.
Y'all ain't seen nothin' yet. 2s30s <100 coming next.
No way QE3 is going through with WTI already pushing $100. If QE3 was announced watch WTI hit $130 and gas prices to hit $4.50/gal in time for Christmas. That will help with retail sales and discretionary spending. Unless Ben wants to speed up the coming revolution, he will avoid QE3 announcments.
Thats what I keep concluding firstdivision, go ahead and QE and blow off oil and food prices too the moon and the dollar plunges. Somehow, I cant see this as being their plan.
However, $5 trillion sits parked in the ETF 401K's and pensions theyve been pumping, and no one suspects a thing just assumes theyre totaly safe.
Hmm.
QE and Higher gas and food prices which will break the economy, or no QE and higher Treasury borrowing costs which will also break the economy. Pick your poison Timmy.
I think he'll plump for the former, simply because it means that the Feds will still have access to money, and all the benefits that brings, even when everyone else doesn't.
I see them continuing small stealth coupon purchases that will maintain the levels we are currently at (i.e. not cause WTI to break $100).
I guess it depends on what the 'True' demand for Treasuries turns out to be, absent the 'Bernanke Put'.
If the Fed finds itself having to continue to buy 75% of each issuance (a la QE2) just to keep yields where they are, then stealth purchases just won't cut it. They'll just have to come out and buy openly.
There's another option.
Kill Spanish and Italian funding markets, force Germany and China to pay for them, the remaining slosh should be enough to fund USTs.
That would work once. The problem is that, as far as I can see, the USG plans to run multi-trillion dollar deficits for decades to come. It also plans to do this at record low yields. Fact is, there simply isn't enough money in world to do that, unless somebody prints some more. Which is where Ben comes in.
it's only temporarly...
UNTILL QE3 BEGINS!
And why wouldn't the market price in QE add infinium...apparently the market is smart enough to know the government is now resembling its populace where it has to borrow beyond its means to pay the basics (medicare, social security and of course, bloated government salries and benefits).
It is now an endless cycle of the government having to spend more BECAUSE of QE as QE causes prices to rise but tax revenues to fall which causes more QE which causes.............
I guess we're supposed to be infants now, each 'peekaboo' a total surprise where we erupt in joy and laughter, no matter how many times in a row its done.
I LOVE THAT GAME PEEKABOO!
over here we call it KIEKEBOO, but I think the rules of the game stay about the same :)
as QE causes prices to rise but tax revenues to fall
THAT'S THE GOOD PART! YOU DON'T NEED TAX REVENUE IF YOU QE!
and Krugman is really pissed
Barack Obama, Comedianhttp://krugman.blogs.nytimes.com/2011/08/01/barack-obama-comedian/
I love how events of this level of significance go largerly unreported. Really challenges my ability to continue to identitfy as an American. The point i'm trying to get across is I'm tired of not being told the whole truth and taking it on the chin*.
Yet clearly homophobic, hmmm. You want to identify with Americans again? Here's what you're gonna need: a television, Zoloft and a general sense of impotence and despair. I'll walk you through this if I have to...
I"M NOT HOMOPHOBIC!
But i could kiss the volume players who are punishing the /es right now, so take that last comment for what its worth.
I'm thinking this market will be going red at some point in the next few hours congressional votes notwithstanding
Watch the end of Obama's re-election hopes if the next iteration of QE is announced as Oil (and subsequently the price of gas) heads back towards the $130 area. If you figure it gained about $40 or so bucks from the announcement of QE2 (and it did) in Jackson Hole of 2010, then $130 is a conservative estimate of where it will go.
$4.50 gas will be the end of Obama.
And more stores close, big national chains such as Borders, board up their windows. Whats going in that space next? Probably a FEMA/DHS regional HQ.
i still call a major war taking place instead of another QE. what better way to rally behind a president who is slumping in the polls.
Yep! Standby for major terrorist attacks, since the Pentagon just reported 'Iran can now reach US mainland with nukes' and the WW3 no one saw comin.
Who is Osama BL II?
I want to know how to look for the next 'risk-off, we killed those who hate us'-rally.
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