This page has been archived and commenting is disabled.

Treja Vu: Bond Market Starts Year With Third Consecutive "Dash For Trash" Surge

Tyler Durden's picture




 

A few days ago, we noted how in light of the most recent temporary bout of market insanity, which has seen the worst of the worst companies broadly outperform risk, one should go long the 30 most hated companies in the US as determined by the short interest to float ratio. We ourselves are unsure if this was a mock recommendation, or the only way to make money in a time when short covering is the only viable trading "strategy." Now as it turns out, precisely the same approach of pursuing the biggest losers has worked in the bond world as well. As the following graphic from Reuters shows, the three best performers of the year in rates, is 10 Year paper from Ireland, Italy, and, yup, Greece, all of which have returned over 4%. The US? Down 0.7% YTD. Why the divergence? Simple - the market is fully positioned for continued massive balance sheet expansion out of Europe which at least for the time being appears to have been passed the baton of monetary irresponsibility. At least that is what the market prices in. That and some ridiculous amount in one the next 3 year LTRO next month (which however does nothing at all to fix solvency, and in fact merely makes the day of reckoning even more painful when it starts - what happens in 3 years: the ECB is forced to do a €100 trillion 7 day MRO every week to roll the entire European balance sheet on a weekly basis?). Whether the market be disappointed, we will known in just under 6 weeks. Either way, here is what bond returns look like Year To Date. For anyone hit by a case of treja vu, you are not alone: this is precisely the same pattern we have seen for the third year in a row. What happens next is well known.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 01/20/2012 - 10:07 | 2080790 firstdivision
firstdivision's picture

USG10 is dumping now.  Wonder who's dumping it?

Fri, 01/20/2012 - 10:13 | 2080812 LawsofPhysics
LawsofPhysics's picture

Good question, PIMPCO or institutional investors?

Fri, 01/20/2012 - 10:18 | 2080827 firstdivision
firstdivision's picture

Bonds dumping...oil dumping...wtf?!?  AUD seems to be moving in lockstep with the 10Y, and the Sterling is off to the freaking races.

Fri, 01/20/2012 - 10:18 | 2080833 Spitzer
Spitzer's picture

It doesnt seem to matter. US paper is magical.

PIMCO can dump all of their treasuries, Russia can dump half of theirs and the price goes up.

Fri, 01/20/2012 - 10:16 | 2080824 Village Smithy
Village Smithy's picture

They are testing Benny's resolve. BTFD.

Fri, 01/20/2012 - 10:10 | 2080802 GeneMarchbanks
GeneMarchbanks's picture

The worst is really the best. -Ancient Asian secret.

Fri, 01/20/2012 - 11:23 | 2081025 Oh regional Indian
Oh regional Indian's picture

Could not have said it better meself Gene. As I learnt yesterday, Mundus velt decipi, ergo decipiatur.

;-)

ori

Fri, 01/20/2012 - 10:14 | 2080817 disabledvet
disabledvet's picture

"dogs of the Dow" goes global. I like dogs of course. Sure they eat their poo...but while we hate them for that we love them anyway.

Fri, 01/20/2012 - 10:15 | 2080820 Spitzer
Spitzer's picture

US paper is the real dash for trash because its a bubble. Euro paper is not in a bubble

http://freegoldobserver.blogspot.com/search?updated-min=2012-01-01T00:00...

Fri, 01/20/2012 - 10:19 | 2080835 SheepDog-One
SheepDog-One's picture

This is just all full retard, everyone piling into negative real yield bonds, sopping them up like bisquits and sausage gravy at a truckstop, moron-like exuberance in stocks....'because surely another bailout will be soon arriving'....hey everyone can have fun playing with these helmeted retards in the sand box, I'll just be watching with my PM's.

Fri, 01/20/2012 - 10:31 | 2080874 Dr. Engali
Dr. Engali's picture

I think I'll buy some junk so that they can give me a 50 % haircut. You never go broke taking a profit....the sellers of this shit that is.

Fri, 01/20/2012 - 10:38 | 2080896 NotApplicable
NotApplicable's picture

Moral Hazard pays well, i see.

Fri, 01/20/2012 - 10:43 | 2080903 chinaboy
chinaboy's picture

The so called 'efficient' world wide bond market get drunk almost everyday (starting at the begining of every trading day).

Fri, 01/20/2012 - 11:12 | 2080984 DOT
DOT's picture

The so called 'effluent' world wide bond market....

That sucking sound is the Fed saying "Thank-you"

Fri, 01/20/2012 - 11:06 | 2080920 OldE_Ant
OldE_Ant's picture

Just another day at the FEDhole...

Where our motto IS:

YOUR price is, OUR price!

YOUR trash, for OUR CASH!

(with salesman fast caveat voice)

EVERYDAY! NO questions ASKED!

Come again soon with your next pile of Toxicity.

We here at the FEDhole actually DOOOOOO like SH1T!NG A$$et$.

The more the better!

Fri, 01/20/2012 - 12:46 | 2081329 orangedrinkandchips
orangedrinkandchips's picture

EVERYONE ON THE SAME SIDE OF THE ITALIAN CRUISE SHIP!!!

 

THERE IS ONLY ONE SIDE TO A TRADE.....ONLY BUYING AND NO COUNTERPARTY!

 

LOAD EM UP!

Do NOT follow this link or you will be banned from the site!