Treasuries Poised For Breakout As Key Technicals Taken Out

Tyler Durden's picture

By now everyone and their dog knows Treasuries are on the move. The move, however, is sizable as 10Y yields break above their 200DMA for the first time in almost five months. This is the second largest two-day jump in yields in 16 months as the market wonders whether this is the breakout where 's##t gets real' or a test of resistance at the October 2011 spike highs. Only AAPL time will tell.

Unsurprisingly, given the anchored short-end, this also means the term structure is its steepest in 5months (2s10s) though we note that the butterfly 2s10s30s is only back (for now) to two month highs) - well below the Oct 2011 levels the absolute yields are closing in on.

Chart: Bloomberg

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GeneMarchbanks's picture

Transfer will soon be complete as Apple will simply takes over.

SheepDog-One's picture

US Treasuries now obsolete, we've got the Apples. All anyone really needs.

trav7777's picture

wtf the Fed expect when it is trying to extract liquidity and chase from bonds?

The other post says Bernank thinks the "recovery" is "frustratingly slow"...that's because it's NOT a fuckin recovery, it's a New Age of Contraction and all his dumbass presuppositions are false!

Jason T's picture

I.E. See gasoline consumption.. miles driven .. food stamp usage.. food and beverage volume sold ..5 year low

CrashisOptimistic's picture

Beverage volume low?  Do you have a link for that?

I'd been under the impression that the soft drink companies were the surprise of the whole event -- that soft drinks were immune to recession.

Xkwisetly Paneful's picture

Basically a 25yr bond rally and yet I read about the dollars relevance and the need to save the petro dollar. It is preposterously farcical.

Manthong's picture

Solid and strong investment in the USA.

Kind of like investing in the U.S.S. Enterprise.


Xkwisetly Paneful's picture

DEC 2008 yields went negative incl transaction costs, the world paid the US to hold it's money when shit hit fan.

Can keep pretending otherwise but it seems foolish.

SheepDog-One's picture

Youve got it all wrong Trav, Bernank is not a 'dumbass' nor a 'good hearted but 3 Stooges-like repairman' flailing about trying to fix anything at all, he's MONETIZING THE DEBT and thats all.

Troll Magnet's picture

How fucking dare you compare the Bernank to the esteemed Three Stooges?  I LOVE LARRY, MOE & CURLY!  Shemp not so much.  He sucked.

VanceEva1's picture

my classmate's sister makes $82 hourly on the internet. She has been out of work for 10 months but last month her income was $17192 just working on the internet for a few hours. Read more on this site ....

Ahwooga's picture

Wow. Any chance they are hoping no-one remembers that? Apple to buy youtube and delete all opposing content.

Mr Lennon Hendrix's picture

Rates will rise over Bernanke's dead body, so you know what I'm hoping for.

LongBalls's picture

absolutley NO way. Rates might rise but only modestly. In the face of 1.2T deficits? Not a chance.

Cdad's picture

Well, it is a good thing that the US does not currently have all time high record Ponzi debt...and a need for more world record issuance.

spine001's picture

In mathematics when we want to understand a complex sytem we always start by looking at the extremes. Here that would mean, NO FED owned treasuries (the zero limit) and the FED owns ALL treasuries (the infinite limit). Just assume that at the next FOMC meeting Bernanke announces that the FED is buying ALL outstanding treasuries. What will happen? Got that? It is possible, and inside the FOMC perview. Once you finish digesting tnat scenario, you can start to guess where we are. Just in the middle of these two, but getting closer to the infinite one...


Untiil next time,



gmrpeabody's picture

I thought they just said as much....

They are buying an unlimited number of longs, sterilized by selling new shorts. Well, nobody else is going to buy them.

SheepDog-One's picture

Bonds break out, stocks break out, dollar breaks out, PM's break it sure is Springtime for ObaMao huh!

WonderDawg's picture

Insanity, but it is what it is. Take advantage of it. Gold's on sale! But I don't think we've seen the final sale price yet, maybe down around $1300? But why take chances, buy on the way down. I'm holding off on silver, I think it makes its way back to the mid to low 20's. But what do I know? A country boy can go nuts trying to figure this shit out.

CvlDobd's picture

Bonds are breaking down not out.

I think the retard market will reward stocks for this at first then say "oh shit" high yields on monster debt is bad not good.

I'm probably giving the market too much credit though.

Today I'm reading analysts say the yield breakout means good things for the economy. Debt will eventually break most markets.

spine001's picture

Let me make it simple for you:

1) Income is limited worldwide (call it yields, dividends, etc.)

2) Fiat money is unlimited, you just priint it out :) (or worse you eprint it out, at least before printing presses did set a limit, now there is none)

From 1) and 2) it shoiuld be obvious that income will get more expensive to get

That creates 3) to 8) as  corollary,

3) Equities will go up in fiat money terms (since income will be more expensive)

And 4) Bonds will go down in price due to increase in fiat money, but the increase will be delayed due to the large availability of capital due to increase in fiat money

5) Money in bonds will steadily loose its real value (value to acquire actual constant value income)

6) People (Muppets?) will realize this after years of loosing capital and will have NOWHERE to go except to start a company themselves or to invest in equities

7) The move triggered by 6) will reinforce the increse in the apparent value of equities.

8) The average P/E ratio will steadily go down

The only offset to this sequence is a major even to derail its progression, WW3, Bernanke dying, Republicans winning the white house in November, the FOMC stopping their continuous rounds of easing, etc.

Until next time,


Currency is Debt's picture

Due to the phenomenon that the CB's print the money and require interest on that money there is a shortfall. Ie they print 1 million but demand back 1 million plus 50k interest. Where is the 50k?

This is why 'we need' asset bubbles. As long as asset values are growing this can cover this defiency. In a contracting economy all the shit hits the fan as we have seen the last few years. IT appears that the short fall is a black hole. The only solution is to expand the money supply further and boost asset and price levels to cover the previous shortfall. This in conjunction with an asset bubble- a wealth effect creator leads to 'further growth'(inflation). Ie real estate last time, maybe equities and commodities this time. There needs to be a bubble wealth effect created to have a economic 'bull market'. 

Even though the whole thing is a Ponzi scheme - you had better believe that these people wield the power over all these pieces of the puzzle and they will find a way to periodically prop and boost things up. Obviously this occurs via an inflationary scenario thus far and more than likely in the future also.

Ted Baker's picture


Corn1945's picture

Wouldn't buy US Treasuries unless they yielded double digits.

rumblefish's picture

so does this mean equities should go down?

SheepDog-One's picture

Yea but now apparently stocks are not allowed to be any less than up 1% daily.

The trend is your friend's picture

The Banking cartel are now in the technology business, aerospace technology actually.  They have had massive breakthrough in anti gravity technology.  They can keep things, in their case Markets, suspended in mid air with no support infinately.  Einstein would be proud.

CrashisOptimistic's picture

One other thing in the "should" category.


Treasuries were down sharply all last night.  Nothing happened in NY early this morning to compel selling Treasuries.  It started as soon as futures opened after yesterday's close.

Stocks were up 1% night before last.  The bullshit headlines of "stocks are up AS (always the AS word) retail sales grow solidly for XXX consecutive months)" were silly.  It also had nothing to do with Bernanke's statement and not much to do with JPM.  Stocks were up 1% before that report ever came out.  They were up 1% before the market even opened.  They were up 1% a few hours after Monday's close.  The futures dictated it, as they frequenly do for Tuesday morning of late.

There is a huge amount of bullshit going on in this low volume equity market.  Pretty much none of it has to do with fundamentals.

spine001's picture

No, but read my comment above explaining what is happening and will happen

See you next time,


Sophist Economicus's picture

Need suckers to start shorting so that the take down will be risk-free

CrashisOptimistic's picture

Pretty much incomprehensible.

Gold being smashed as Treasuries also are being smashed, while oil is flat.  What can possibly make sense about this?  Booming economic growth would be inflationary AND would boom oil consumption.  So bond yields would go up, but so would gold and oil.  Not happening.

If economic growth were underperforming, bond yields would be falling.

Bernanke cannot allow yields up.  Simply that.  At 16 Trillion in debt, a 1% rate uptick is a 160 billion dollar fiscal budget smash when we've already seen that Congress cannot even tolerate a $4 billion spending cut.

If this is vigilantes, we'd see other effects.  We'd see dollar weakness, not strength, because the vigilantes would sell so aggressively that they'd damage the economy.

Overall, incomprehensible, as so much is nowadays.

SheepDog-One's picture

Well theres a good answer to the 'So now what' question.

SheepDog-One's picture

I guess its the effects of the plan where they flooded the world with so many trillions that nothing can go down.

So they got all markets manipulated 100%, and so much free fiat sloshing around that it negates any normal market effects....but you got to ask the question 'Ok, but now what'? 

Someones got to pay the piper at some point...we've just been marching in place and living a fantasy for 4 years.

CrashisOptimistic's picture

Well, I am not a signer on to the whole concept of "oh no!  all this horrible printing of money!" flailing.

Real estate collapse and defaulted mortgages erased trillions of dollars and euros from the universe.  Trillions upon trillions.  All money gets printed at some point.  All of it.  That's how it works.  The printing of money was not excessive additional.  it was replacement.  The money was eradicated from the universe by real estate collapse.  They replaced it.

Simply that.

What is offensive is the loss of mark to market accounting.  The putting of all that bad paper in vaults and pretending the money DIDN'T disappear for purely accounting purposes . . . that's what is corruptive.  Not printing.

Underlying all this is oil scarcity, of course.  It is the source of all disintegration we see, but unlike those other factors, nothing can be done about it.

SheepDog-One's picture

No one took any losses. The idea that they 'replaced' lost money with new fake money simply proves that someone somewhere is going to have to take the real loss.

That of course will be you and me, and mom and pop and their pensions and 401K' that hardly anyone can see it but oh well. The mechanism for doing that in my opinion will be the start of WW3, after all its always been the perfect time for the banks to wipe clean the accounting books.

No ones trying to figure out how to fix anything here, all the 'money printing' has just been the phase where the CB's buy up every asset under the sun for free for themselves, thats all. Theyll seize the pensions and 401K's one overnite when theres a 'terrible and totaly unforeseen event' and everyone will look around and say 'Huh? Hey what happened to all my funds!' Game over.

Xkwisetly Paneful's picture

Anyone collecting the 2/10ths of 1% on their savings has and will continue to take the real loss.

CrashisOptimistic's picture

Of course they will.

And they're happy to do so to avoid risk.  They'll remain happy to do so when nominal yields go negative within a year or so.

SheepDog-One's picture

You say the amount of printing was not excessive, just replacement? On one hand, way more than replacement, on the other hand, not even close to the derivatives loss of $250 trillion, or so. And doesnt even touch $1.2 Quadrillion real funny money out there traded by banks out of thin air. 

Anyway the whole argument is irrelvant, the way I see it all the money printing theyve done was just to buy every bit of debt out there, theyre MONETIZING THE DEBT, for ownership, when they finally pull the rug out. Really no more complicated than that.

CrashisOptimistic's picture

A great deal more money was lost to the universe in defaulted mortgages than was printed.  QE2 was "only" $600 billion.  Trillions upon trillions of mortgages have been defaulted (and worldwide, not just US).  TARP was only 700B.  The QEs have not been trillions.  

In that context we can make a case for inadequate printing.

You are correct about irrelevance, though.  Oil's scarcity changes all of it.  The flailing about and focusing on swollen lymph glands and even surgical removal of them has no effect on the core cause -- infection with bubonic plague.

Xkwisetly Paneful's picture

ftr there is only $12trillion in total residential mortgage debt in the US. Since Europe is of similar economic size but less homeownership maybe there is $8trillion in Europe, so how much of that defaulted? Not trillions and trillions and trillions.

I may agree with you if the banks had actually deleveraged but I see no evidence of that.

Peak oil has fuck all to do with anything.

CrashisOptimistic's picture

Your numbers sound like 20 trillion in global mortgages.  Just a 10% default rate would be trillions, plural.

2 trillion is more than total Fed QE + LTRO, as best I recall.

This is not an oil thread so I won't argue the scarcity issue here.

ffart's picture

It seems like raising yields on a debt that the U.S. government can't make whole without monetizing wouldn't lend itself to a stronger dollar. Then again, I'm just a simpleton who also doesn't think peak oil has anything to do with why it's gone up exponentially over the last few years.

kraschenbern's picture

Like the way think SheepDog-One.  You must have read "The Road to Serfdom", that's how it ends.

roccman's picture

"Underlying all this is oil scarcity, of course."


Bingo - the blue ribbon goes to you!!