2s10s

2s10s

Treasury Curve Collapses To Flattest In 8 Years

This was not supposed to happen. The spread between the 2Y Treasury yield (which is soaring 7bps today) and 10Y (higher by 3bps) has plunged back below 120bps. The current cliff-edge has been support for the curve four times in the last 8 years but with GC rates blowing out to 7 year highs, one wonders if the size of the moves means we break to new regime lows.

Exter’s Pyramid “In Play” (And Is Martin Armstrong Right?)

the major story for us right now is that the broad concept incorporated in “Exter’s Pyramid” is in operation. This something we mentioned in Autumn last year and it’s occurring across currency and credit markets and, to some extent, in equities. To recap, John Exter (a former Fed official, ironically) thought of the post-Bretton Woods financial system as an inverted pyramid resting on its apex, emphasizing its inherent instability compared with a pyramid resting on its base. Within the pyramid are layers representing different asset classes, from the most risky at the top down to the least risky at the bottom. He foresaw a situation where capital would progressively flow from the top layers of the pyramid towards the bottom layers. “…creditors in the debt pyramid will move down the pyramid out of the most illiquid debtors at the top of the pyramid…Creditors will try to get out of those weak debtors & go down the debt pyramid, to the very bottom."

Bonds Bid And Stocks Skid As Investors Realize Wednesday Is Not Tuesday

It would seem that the day after Tuesday is not Tuesday... and so stocks sold off. The Russell 2000 is now 3% off its Monday highs, comfortably red for the week, and back below its crucial 200day moving-average. The Nasdaq is also down with the 50DMA crossing death-like below the 100DMA. Of course, it is the "you can't trust the signals" bond market that is making the real headlines as 10Y yields slump to fresh 7-month lows breaking notable support. The USD leaked lower on the day (but USDJPY was stable under 102) as ECB talked back some of the recent EUR losses. Commodities all pushed higher with silver up over 3% onthe week, gold back over $1305, and WTI over $102. VIX pumped-and-dumped at the open but could not sustain weakness as 330RAMP saw VIX's slam unable to drag stocks notably higher.

Dealer Awards Surge, Directs Plunge In Ho-Hum 2 Year Auction

While the auction overall was not fireworky just yet, a few more "dots" fiascoes and suddenly the short end of the curve is going to get a whole lot more interesting. And should European idiot asset managers, once they have taken the Spanish 10 Year to 0%, decide to bid up US paper, and inverted the 2s10s, well that is the time to quiet get out of dodge.

30Y Treasury Yield Tumbles Under 3.5% - Lowest In 9 Months

The short-end of the Treasury curve continues to reprice higher in yield (3Y +2bps) as the term structure bear-flattens with 30Y yields rallying further after the aggressive 7Y auction. 30Y yields just broke below 3.5% (-4.5bps) - the lowest level intraday since early July 2013. 2s10s are now at 2.21% - near 10-month lows - and 5s30s has plunged to 1.80% - its flattest since September 2009.

Stocks Close At Record High On Russian ICBM Launch

It would appear the BFTATH mentaility has morphed into a BTFICBMD perspective as the "market" shrugs off an 'apparently expected' ICBM launch to soar to new record highs with the best day in stocks for months (if not years). USDJPY was in charge intraday as 102 was flushed through (with JPY's biggest drop in 2 months) and dragged stocks (led by the "most-shorted") non-stop. Equity volumes were 20-30% below yesterday's. The USD was relatively unmoved on the day (modestly higher oddly on a risk-on day). Gold and oil prices slipped (but remain in the green on the week) as Silver slipped into the red. Copper rallied. Treasury yields surged 6-8bps (the biggest jump in 4 months) as 2s10s steepened 6bps. VIX was cracked 2 vols lower to 14%. The S&P closed at 1873, just 27 points shy of Goldman's 2014 year-end target.

Welcome Janet: Worst February Start For Stocks In 32 Years

The Nasdaq plunged by the most in over 8 months today and broke all the way back to unchanged from the December taper decision of the Fed. All major US equity indices are now negative from the time the Fed decided to slow its flow of free money. The Dow closed below its 200DMA for the first time since December 2012. The S&P 500 closed the furthest below its 100DMA since QE3 started. USDJPY was in charge and everything was higher or lower beta off of that as it broke 102 early then 101 later in the day (with the Nikkei -700 points from the day's highs). Treasuries rallied around 5bps to fresh 7-month low yields for 30Y. Gold and Silver surged, adding 1% on the day as the USD lost 0.25% on the day (led by the 1% strength in the JPY). VIX smashed to 14 month highs over 21%. Credit deteriorated but stocks are catching down.

Treasury Yields Tumble To 2-Month Lows; Dow/S&P Still Red In 2014

JPY crosses were in charge of stocks again today - and not in a good way - as a sideways market gave way to weakness late on as Goldman released part two of their market-bashing research. With the dramatic help of AXP and V (78 of the Dow's 41 points!), the Dow was the only index green today and managed to close just green on the week. Since the taper, Homebuilders have tumbled from heroes to almost zeroes (+1.5% from +6.5% at year-end in spite of the big drop in TSY yields in recent weeks) with Healthcare outperforming (+5.5%). Away from stocks, things were also escalating rapidly this afternoon. Treasury yields limped lower all day then dropped notably starting around 1445ET with 30Y -5bps on the week (and 5s30s at 212bps - the flattest term structure in 4 months). The USD rose on the day (up 0.75% on the week) led by EUR weakness (JPY was relatively stable). Despite the USD strength, gold and silver closed green on the week (+0.25% and+0.7% respectively) but WTI crude led the way up 1.5% on the week at $94.10. Despite valiant efforts to VIX-slam the market higher into the close, the S&P closed red and VIX +0.6vols higher on the week at 12.7%

Stocks Stick-Saved While Bond Bears Battered

Treasury yields collapsed 10-12bps today with the largest decline since 9/18/11. Treasury yields in general slipped back to the lowest level in 3 weeks. The USD was slammed lower (except against CAD which pushed lower - down 2.5% on the week!). JPY strength was offset by AUD and the cross provided the ammo to lift equities back to day-session highs in the last hour (104 USDJPY was defended aggressively). Stocks broadly bounced immediately after the knnjerk selling off the NFP print, then leaked lower until 3pmET when a decidedly low volume meltup took NASDAQ and Russell back to almost unchanged on the year. Trannies outperformed, Dow underperformed (TRAN +0.65%, DOW -1% YTD). Silver and gold surged back into the green for the week with the latter closing above its 50DMA for the first time since October and its highest in a month. VIX tumbled to 12.2% as hedges were lifted and recoupled with the S&P.

 

Bonds Close 2013 At 30-Month High Yields

The Treasury bond has now closed for 2013 with the (highest duration) 30Y Treasury Future down 13% for the year. Of course, those invested in fixed income are not all long the long-end but across the whole complex yields are at highs. 10Y ended at 3.03% - its highest since July 2011 and 30Y at 3.97% - its highest since August 2011. The short-end remains under control (though 15bps higher than its mid-November trough and double the May lows at 40bps) but the 7Y yield has surged back to 2013 highs also not seen since mid 2011. Perhaps most notable is that despite all these moves, 5s30s is unchanged on the year, while 2s10s is +120bps.

Up, Up And Away: At Least Something Is Going "Straight Up"

Sadly, that "something" has nothing to do with the real economy, but it has everything to do with the stock market which is all that matters to the Fed. Presenting the Adjusted Reserves held by Fed banks: it is, logically, at a fresh all time high. This is the low-powered money that due to capital allocation preferences continues to go, every day for the past 4 years, not into the broader economy (blame it on the 2s10s, or the disastrous state of the US consumer who has no desire for loans, or what have you) but straight into the S&P500. Since the full blown launch of QE3 excess bank reserves have grown by $500 billion, or roughly a 30% increase in six months. Which is also the reason why the S&P has correlated not with any actual fundamental data, but only this chart for the past 6 or so months.