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Treasury Yields Tumble To New All-Time Lows

Tyler Durden's picture


Despite some early angst, Treasury yields have been crushed lower today. Down 7bps from their European close levels, 30Y is trading with a 2.45% handle for the first time ever and 10Y now with a 1.39% handle. Both all-time record lows as the 2Y auctions with a 4x bid-to-cover as 2s5s flattens to almost five year lows as the Fed's ZIRP and Europe's NIRP has pushed investors to front-run into preservation of capital instead of pushing them out on the risk spectrum. For those who care (instead of preferring to listen to dividend-stock-touting talking heads), 10Y TSYs have plenty of room to run if rates keep falling (15% upside if Japanification takes hold) - which prompts the question - just what is the interest expense convexity for the Government if rates were ever to rise from here?

10Y Treasury yields with a 1.39 handle...

and 30Y with a 2.45 handle...


Charts: Bloomberg


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Tue, 07/24/2012 - 13:52 | 2646214 Jlmadyson
Jlmadyson's picture



Tue, 07/24/2012 - 14:03 | 2646260 battle axe
battle axe's picture

SAFETY, and a real big bubble that has to burst sometimes. Ironic isn't it. 

Tue, 07/24/2012 - 14:31 | 2646363 Skateboarder
Skateboarder's picture

A year ago it was over 3%. It's on it's merry way to 0...

Also, lol when playing the stocks game is safer than bonds...

Tue, 07/24/2012 - 15:12 | 2646526 Precious
Precious's picture

This phase will make 2008 look like a kiddie pool.  Dark days of earning announcements ahead ...

Tue, 07/24/2012 - 19:29 | 2647484 boogerbently
boogerbently's picture

This, alone, is a testament to the IGNORANCE of the typical investor.

Buying the "safety" of dollars that are diluted every 4-6 months, in an investment that yields LESS than inflation steals.

All the while treating gold as a commodity, instead of the real "safe haven".

They are CERTAIN the US govt. will pay. I guess they haven't been following any of the stories about public pensions, Soc. Sec..........

Tue, 07/24/2012 - 14:15 | 2646298 ITrustMyGut
ITrustMyGut's picture

greenspan alledgedly told us.. housing was the next to last bubble.. bonds would be the LAST


and goldenjackas a month+ ago suggested that once 1.5 breeched.. it would be the BLACK HOLE


stand by



Tue, 07/24/2012 - 13:55 | 2646222 Snakeeyes
Snakeeyes's picture

Yes, but everyone is seeing a "Sea of Red" in sov yields. Just hum along to "Sea of Love."

Tue, 07/24/2012 - 13:56 | 2646225 Rusticus
Rusticus's picture

Borrowing sans usury, there's your exceptionalism. 

Tue, 07/24/2012 - 13:58 | 2646228 Temporalist
Temporalist's picture

And gold still hanging in there as everything else gets stomped.  Good signals for gold "competing" with strong dollar.  Much like the "multiplier" not working the "manipulator" effect seems to be wearing off.

Tue, 07/24/2012 - 14:22 | 2646323 ParkAveFlasher
ParkAveFlasher's picture

on that note, this is the second day in a row that gold and silver aren't matching tic for tic in the spot price chart...the moves look the same jaggedty-wise (forgive the terminology but I am an amateur) but the pricing level of the moves are shifted, as is the general slope...anyone else seeing that?

Tue, 07/24/2012 - 14:43 | 2646415 jimmyjames
jimmyjames's picture

anyone else seeing that?


Typical deflation trade-

Silver still unloading its industrial weighting and gold has diverged from the industrial metal complex and is trading in monetary fashion-although somewhat weak-but very bullish should it continue-

Silver can afford to be late-she's blinding fast when/if the monetary side starts to favor her-

Tue, 07/24/2012 - 13:57 | 2646232 Paul Atreides
Paul Atreides's picture

Finalize your preps bichez!

Tue, 07/24/2012 - 14:02 | 2646254 Temporalist
Temporalist's picture

No shit my sentiments exactly as I was thinking that just the past few days.  Incidentally the movie "Contagion" is available on-demand which is a good example of how government will lie, people will try to save themselves and their loved ones first, realtive peace turns to utter chaos in days and a list of other disaster scenario themes. 


Wed, 07/25/2012 - 03:53 | 2648229 Rogue Trooper
Rogue Trooper's picture

Well Bitchez... 'cause this could turn into the FUBAR beyond all prevous FUBAR's earlier than we thought.

If you have not started... some introductory training for you city folk... not exactly, I hope, but you will get the drift!

Hope this was helpful....

Tue, 07/24/2012 - 13:59 | 2646239 orangedrinkandchips
orangedrinkandchips's picture



holy shit on a shingle....

Tue, 07/24/2012 - 14:00 | 2646240 White.Star.Line
White.Star.Line's picture

Gotta pay extra now for some of that "relatively" safe US Treasury paper.

Like signing onto the Titanic Lifeboat List.

Lotsa names, not enough boats!

Tue, 07/24/2012 - 14:00 | 2646242 zero19451945
zero19451945's picture

Dividend stocks make sense, just not at the levels they've been bid up to. I'd be buying hand over fist if the Dow ever drops significantly below 10K.

I can own a stock that pays 5+% or a US Treasury Bond that guarantees me a capital loss once inflations eats the coupon and principle.

Tue, 07/24/2012 - 14:14 | 2646293 Conman
Conman's picture

Or when that awesome divedend owning stock implodes, are you really getting a divdend or an ass raping? see CHK, ETN,  MCD, etc etc etc for all those safe dividend players that are well off the highs.

Tue, 07/24/2012 - 14:21 | 2646321 zero19451945
zero19451945's picture

Exactly. Just don't buy at these levels.

Tue, 07/24/2012 - 15:41 | 2646644 spine001
spine001's picture

Yours is a great strategy! The only problem is that the FOMC with B. Bernanke at its head has set up an unstable system that will not allow the Dow (DJI) to go under 10000 and stay there, the amount of liquidity they have injected in the system is such that a Dow 14000 is equivalent ot a Dow 8000 of 5 years ago, due to extra dollars available in the market. So there are only two possible stable points for the Dow (and sadly, many, many more unstable ones that can lead us to crisis and more wars), way down, to 1000 to to 20000, nothing in between. The reason for the 1000 is that the crisis will be such that the companies will stop producing profits for a long time, since liquidity will keep on accumulating in the the accounts of the top 0.0001% and less and less will be available to the bottom 99% that companies will not be able to restructure enough to survive, at least most of them. The dow 20000 will occur if they keep on injecting liquidity and devaluing the value of the dollar and they simultaneously mandatorily increase wages and rescue underwater homeowners and impose losses on Senior bondholders. Since this is the only way that inflation will occur. So take your pick, but don't believe that buying at a fixed level will help you out. Earnings and dividend distributions depend on people (the 99%) having money to spend... :) Never forget that...

Until next time,


Tue, 07/24/2012 - 14:00 | 2646247 Benjamin Glutton
Benjamin Glutton's picture

Bernanke channeling Lincoln and recreating the Greenback????

Tue, 07/24/2012 - 14:37 | 2646264 Bam_Man
Bam_Man's picture

OK, maximum upside from here in a 10 year UST is 15% with 90% of that from possible capital appreciation.

Maximum downside is a potential loss of perhaps 80% or more in the event that interest rates ever "normalize". In an unlimited money-printing and high- (not hyper-) inflation scenario, a 90% loss would be entirely possible.

Buy US Treasuries at these prices/yields? No, thanks.

Tue, 07/24/2012 - 15:36 | 2646633 DavidJ
DavidJ's picture

15% upside?   The yields could go negative!!!!  (jk)

Tue, 07/24/2012 - 19:33 | 2647492 boogerbently
boogerbently's picture

....and the sheep would continue to buy them. LOL

Tue, 07/24/2012 - 14:05 | 2646269 Snakeeyes
Snakeeyes's picture

Imagine the new mortgage rates and MBS refis? OOGGHH!!!

Tue, 07/24/2012 - 14:06 | 2646270 Lost Wages
Lost Wages's picture

I'm rich, beeyotch.

Tue, 07/24/2012 - 14:06 | 2646271 monopoly
monopoly's picture

Not if rates rise but WHEN!!!....Then, game over. Period. Done.

Tue, 07/24/2012 - 14:06 | 2646273 buzzsaw99
buzzsaw99's picture

If they want another spate of mortgage refis they are going to have to do better than that. It would be ironic if after all this they crashed the market to save the economy.

Tue, 07/24/2012 - 14:08 | 2646278 Cangoroo
Cangoroo's picture

They will never rise. Get used to negative yields and a wee bit of inflation. Bondholders are screwed in Europe and the US. Central banks and puppet banks will buy everything. QE forever.

Tue, 07/24/2012 - 14:08 | 2646279 HaroldWang
HaroldWang's picture

THE only thing holding stocks up is the Fed. Period. This is a really scary time, kids. I can only laugh at anyone who thinks we're not going to spiral into a nasty recession - Fed intervention or not.

Tue, 07/24/2012 - 14:17 | 2646303 Spastica Rex
Spastica Rex's picture

I think with simple definition shifiting, perception management, and selective statistical reconfiguration, a recession will be easily avoided. Forever.

Tue, 07/24/2012 - 14:25 | 2646337 ParkAveFlasher
ParkAveFlasher's picture

second that.  frontal lobes are overpriced, if you know what I mean.

Tue, 07/24/2012 - 14:09 | 2646280 Sweet Chicken
Sweet Chicken's picture

Serious question.


If you have a new mortage (less than five years) why not refi and save yourself a couple of points?!

Tue, 07/24/2012 - 14:20 | 2646317 Sweet Chicken
Sweet Chicken's picture

Maybe I should have been a little more clear. What would be the downside if there are no closing costs to have the refinance done?!

Tue, 07/24/2012 - 14:22 | 2646327 eclectic syncretist
eclectic syncretist's picture

5 more years until you own the place, unless you refi to a 15yr mortgage and save yourself a bundle.

Tue, 07/24/2012 - 14:27 | 2646349 Sweet Chicken
Sweet Chicken's picture

I'm actually considering this but if I keep it at a 30 (sure I lose the years already paid in) but it will drop my monthly paytments almost 200 which will make month to month finances much easier to manage, plus it allows me that freedom wheile still having the option to pay more towards the principal anyways. Thoughts?!

Tue, 07/24/2012 - 14:31 | 2646371 buzzsaw99
buzzsaw99's picture

If you are making the payments and plan to continue to do so then there is no downside. Some people have no-recourse loans they don't want to give up and others haven't been making payments so they might not want a refi.

Tue, 07/24/2012 - 14:20 | 2646318 eclectic syncretist
eclectic syncretist's picture

Why not?  Just be sure to refi with a company that won't sell your mortgage and set you up for ultimately getting screwed out of the home.  Third Federal is one that offers good rates and also prides itself on not selling mortgages to third parties.

Tue, 07/24/2012 - 14:24 | 2646335 Sweet Chicken
Sweet Chicken's picture


Can you explain a little further how one could get screwed out of their home if their loan was sold to a third party?! I'm not completely dense but I'd appreciate a simple explanation on how they could achieve this without fraud.

Tue, 07/24/2012 - 15:13 | 2646538 yrbmegr
yrbmegr's picture

If you're careful enough to remedy any technical defaults in time (and/or assert that no notice was given of any technical default, which is probably required to start the clock on time to remedy), then you probably can't get screwed out of your house.  But there are a lot of ways to technically default, and if the third party is diligent and litigious, and you're not, they might get a judgment against you.

Tue, 07/24/2012 - 16:38 | 2646949 Sweet Chicken
Sweet Chicken's picture

 Great thank you for the insight, I appreciate it.

Tue, 07/24/2012 - 17:28 | 2647203 yrbmegr
yrbmegr's picture

If you are ever threatened with foreclosure, get a lawyer and make the bank produce the properly executed paperwork proving they have the right to collect a debt from you.  Odds are, they can't.

Tue, 07/24/2012 - 14:12 | 2646284 Dr. Engali
Dr. Engali's picture

The U.S treasury is like the fat lady at the bar during closing time. She looks pretty damn good at the time but when you wake up you'll chew your arm off to get out from under her so you can get away.

Tue, 07/24/2012 - 14:15 | 2646296 doc_in_the_house
doc_in_the_house's picture

Just SHORT COVERED my spx shorts

of 1365, 1370 and 1380...ALL @ 1332 !!! = $$$$$$$$$

don't care if they drop to 1320 tomorrow = START BUILDING long positions !!!

i spend about 2% of the total time of stupid daytraders and others (strategists) that spend 10 hours a day watching casino...i spent about 10 minutes a day...

Tue, 07/24/2012 - 14:17 | 2646304 Conman
Conman's picture

So basically you are saying BTFD. Lol amazing.

Tue, 07/24/2012 - 14:22 | 2646328 doc_in_the_house
doc_in_the_house's picture

i coverd ALL spx shorts @ 1332

avg SHORT price = 1370..this DOG AIN'T GOING STRAIGHT DOWN...will happily reshort @ 1360+ and hopefully that will be the last breath b4 spx 1100...

don't understand "BTFD"

also what if aapl beats and casino rises tomorrow? i don't care if spx drops another -0.5%..= buy b4 the deadcat bounce...maybe i should be buying now, but i want lower prices...if pump..don't care, will just wait for 1360 to reshort....i called THE TOP @ 1380 baby!!


Tue, 07/24/2012 - 14:37 | 2646388 Conman
Conman's picture

Basically it means you are blindly buying the market just because "it always goes back up". That my friend is a poor trading strategy, although recently its worked if you buy the dip and sell out of your positions daily. It'll keep working until it stops, but when it stops working, look out.

Tue, 07/24/2012 - 14:33 | 2646334 Paul Atreides
Paul Atreides's picture

This is the part of the night when you are up a couple hundred at the casino and think you are on a roll, few hours later you will be walking out empty handed.

Tue, 07/24/2012 - 14:30 | 2646368 eclectic syncretist
eclectic syncretist's picture

Volume is so pathetic I'd say wait until it picks up substantially before calling any sort of a meaningful bottom to trade off of.  Fundamentals are abysmal for going long here too, although a short squeeze isn't out of the question.  Congrats on the profits.

Tue, 07/24/2012 - 14:15 | 2646297 The Swedish Chef
The Swedish Chef's picture

Where is RoboTard? Masturbating whilst looking at a chart of his new found love government paper`

Tue, 07/24/2012 - 14:22 | 2646326 jomama
jomama's picture

cracks me up when i see those who still don't get robo's humor.  

Tue, 07/24/2012 - 14:19 | 2646311 The Gooch
The Gooch's picture

Looks like the daily afternoon ramp took the afternoon dirt nap.

Tue, 07/24/2012 - 14:20 | 2646316 firstdivision
firstdivision's picture

Anyone remember last year...when the 10Y was at 3? 

Tue, 07/24/2012 - 14:33 | 2646373 Cangoroo
Cangoroo's picture


what they try is to dry up money markets and shift investments to longer maturities. Positive side effect, MM money flows into equity and should kickstart the economy with low cost of capital. Positive side effect, negative yields plus moderate inflation kills debt. Negative side effect debt markets are virtually dead and no money is to be made in MMs. Call it operation supertwist cause at the long end of the curve they will not intervene because of savings and pensions.

Tue, 07/24/2012 - 14:29 | 2646356 asteroids
asteroids's picture

"Cash is a position." I don't like bonds or stocks. Bonds and stocks have gone too far in their respective directions. Gold or silver if it moves in the right direction.

Tue, 07/24/2012 - 14:28 | 2646358 LoneStarHog
LoneStarHog's picture

"...the USTreasury Bond bubble...supported by Interest Rate Swaps to produce artificial demand and to create an illusion of a flight to safety in toxic USGovt Bonds..." - Jim Willie CB

Tue, 07/24/2012 - 14:46 | 2646428 youngman
youngman's picture

I know these guys think they are just parking there money in Treasuries until things get better....6 months to a year at most.....I think its not going to get better....its going to get worse.....2 options I see..interest rates jump up as a flood of countries try to sell.....or the Fed buys everything from here on out knowing if interest rates go up...the USA is really broke...and will lose its AAA...and will lose its place in the will the more reserve status......I am in gold and silver...just watching this crap from the sidelines....IMHO

Tue, 07/24/2012 - 14:55 | 2646468 Downtoolong
Downtoolong's picture

what is the interest expense convexity for the Government if rates were ever to rise from here?

Exactly. It leads to a good theoretical question for the Fed too. What is the value of a bond portfolio which generates no real income, and can never be sold or reduced in size?

Tue, 07/24/2012 - 15:11 | 2646528 LMAOLORI
LMAOLORI's picture



Does the Fed care it's owned by it's member banks and as long as they keep making money off the taxpayers with no real risk why should they..

"The Fed sees this as a radical change. But remember that it paid no interest on reserves before the 2008 crisis and, not surprisingly, banks held practically no excess reserves then. In early October of that year, Congress gave the Fed authority to pay interest on reserves, which it promptly started doing. When the Fed trimmed the federal funds rate to its current 0-25 basis-point range in December 2008, it also lowered the interest rate on reserves to 25 basis points, where it has been ever since.

My suggestion is to push it lower in two stages. First, test the waters by cutting the interest on excess reserves (in Fedspeak, the "IOER") to zero. Then, if nothing goes wrong, drop it to, say, minus-25 basis points—that is, charge banks a fee for holding their money at the Fed. Doing so would provide a powerful incentive for banks to disgorge some of their idle reserves"


The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?

But suppose it doesn't work. Suppose the Fed cuts the IOER from 25 basis points to minus 25 basis points, and banks don't lend one penny more. In that case, the Fed stops paying banks almost $4 billion a year in interest and, instead, starts collecting roughly equal fees from banks. That would be almost an $8 billion swing from banks to taxpayers. There are worse things."

in full


Tue, 07/24/2012 - 15:12 | 2646533 rbg81
rbg81's picture

This is all being engineered.  The Powers-That-Be will do everything they can to keep UST yields low.  If they rise again, the deficit becomes unaffordable and the SHTF.  So those in the know figure that a uber-low yield and safety is better than NO yield.  The problem is that, investment-wise, you're gonna get screwed just about anywhere you turn.  The only entity benefitting from this is the US Government.

Tue, 07/24/2012 - 14:58 | 2646477 Nobody For President
Nobody For President's picture

But the really great news here is that Congress can continue to do nothing and stay on the credit card. Don't have to even *try* to let taxes return to previous levels, much less try to 'balance the budget' (what a joke).

Party on BitChez, we can afford our debt - let 'er rip.

Tue, 07/24/2012 - 15:01 | 2646492 DavidJ
DavidJ's picture

Soon!  My mortgage 30yr will be 1% and my house will have doubled in my price becase of affordability!!!! haha

Tue, 07/24/2012 - 15:06 | 2646508 LMAOLORI
LMAOLORI's picture



Investors Who Stay in Treasurys 'Will See a Haircut': Gross !important; height: 2px; line-height: 2px; font-family: Arial; font-size: 20px; text-align: left; background-repeat: repeat no-repeat;">



Tue, 07/24/2012 - 15:06 | 2646512 yrbmegr
yrbmegr's picture

Moving toward interest rate parity with Germany.

Tue, 07/24/2012 - 15:29 | 2646594 TheBird
TheBird's picture

A post from last year here attempted to back of the envelope that kind of question.

Tue, 07/24/2012 - 15:36 | 2646630 lolmao500
lolmao500's picture

just what is the interest expense convexity for the Government if rates were ever to rise from here?

Just like Spain, Portugal, Italy, Ireland and Greece... too much to bear.

Tue, 07/24/2012 - 15:40 | 2646640 youngman
youngman's picture

I think the foreigers will start to sell fast...prices are us and people will still use the dollar....they will use this cash to buy it gold and land...oil companies...etc...the Fed will have to buy it Goldman can´t get enough Muppets to buy it all..when we finally own 95% of it..we will sit there like we just pulled the pin of a O SHIT moment...I don´t know what to invest I sit on the sidelines in gold and silver...the New York Boys can make money daily on insider info or rate fixing..HFT´s..or daily mo mo...I can´t...I know they can not fake gold.....but they will try to outlaw it or tax it first...that is my line in the sand

Tue, 07/24/2012 - 15:53 | 2646698 covert
Tue, 07/24/2012 - 22:28 | 2647823 Paul Atreides
Paul Atreides's picture

I stand with you at that line

Wed, 08/01/2012 - 03:46 | 2667875 ertgdg
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