2s10s

Tyler Durden's picture

2s10s Prepares To Breach Key 200bps Support, As Curve Flattening Resumes With Feeling





The main (and lately only) bullish indicator that everyone seems to be focused on (for all the wrong reasons), continues to telegraph ongoing distressed for the financial segment: the 2s10s part of the Treasury curve has tightened to 206 bps (this was nearly 290bps a few months ago). At today's rate of flight to safety it is possible the key psychological (whatever that means - computers need therapy if Fib levels are brached?) support level 200bps will be taken out. This means all the leading indicators will soon reorient downward yet again, which also includes the ECRI LEI, which is once again due for an inflection point. And the recently far more critical from a funding standpoint, 2s10s30s butterfly, which we have discussed extensively as the primary carry driver of stock purchasing ability, has just gone double digit again.

 
Tyler Durden's picture

10 Year, 2s10s Both Suggest Manic-Depressive Stocks 70 Points Too Rich






There was a time when stocks, bonds, gold, dollar, oil, correlations, and pretty much anything that isn't nailed down, going up concurrently would make at least some market participants frown. Not so much any more - with the average "trader" an 18 year old pustular math whiz-kid with the personality of a paper clip and a Ph.D. from a prestigious institution to boot, with no idea of just the level of death and destruction their "sentient", "self-aware" and "learning" programs are about bring to the market, nobody cares about that little thing called logic. Yet going off that, and basing observations on the last rational market indicator, i.e. bonds, it appears stocks continue to be about 70 points rich and have a fair value around 1,020 as implied by 10 Year Yields. As the deranged schizophrenic computer algos were blowing threw vacuum tubes like Ukranian hookers go through crack on any given Hamptons weekend, they totally forgot to bring bond yields higher for validation. Which is why the stocks-bonds (10 Year) convergence is now more pronounced than ever. Sell stocks, Sell bonds (Long Yields) and wait for the big Mahwah collocation facility black out that will eliminate 80% of binary market participants that will allow the spread to close.

 
Tyler Durden's picture

Curve Flattening Continues: 2s10s Now Under 240 bps





The most ominous sign for US bank P&L continues to not relent: the 2s10s curve, which is the primary source of "revenue" for the hedge funds formerly known as US banks until a bunch of idiots came along and repealed Glass-Steagall, has just gone inside 240 bps. As before, we view this as the primary margin call threat, as billions, if not trillions, of wrong-way bets on curve steepening move further out of the money with every passing basis point. Once the first major repo counterparty blinks and demands a trand unwind, this trade will snap and we could see an even faster flattening, which would lead to some scary consequences for every other asset class.

 
Tyler Durden's picture

At 281 bps, 2s10s Hit Another All Time Record Wide





Somewhere Julian Robertson is convulsing in a fit of lucre-driven epilepsy. The question for today: what is the bigger pain trade - an outright stock short, or a UST flattener? Everyone knows one shouldn't go against the Fed, however the Fed is behind both of these... So where will it crack first?

 
Tyler Durden's picture

2s10s Steepens Into And Post Auction





Can someone please stop the endless cha-ching noises coming out of Julian Robertson's offices already? What's that? Ok, so...apparently absent some sodomy involving bond vigilantes and the inhabitants of the Marriner S. Eccles buildling, nothing can be done.

 
Tyler Durden's picture

2s10s Steepening Further As Bond Investors Wake Up To Trillions In New Supply





A hundred billion this week, over a trillion next year, and it starts to add up. It appears that what has been phenomenal strength in the UST market for many months now, undoubtedly with the fervent support of the Federal Reserve, seems to be abating. Over the past week the 2s10s charts has moved stepper by about 15 points, proving that Julian Robertson's steepener trade and its Constant Maturity Swap derivatives will likely end up being quite a profitable position. With a record onslaught of new issuance this week alone, and the expiration of POMO activities on Thursday, the supply side of the equation may finally be catching up bond traders.

 
Tyler Durden's picture

2s10s Breaking Into A Deflationary Pattern





Another chart for idiot day traders who think that having a snapshot of a developing market is sometimes relevant. Indeed, we do forget that every data point is always continuously priced in, and need to be violently reminded of that fact: thank you Efficient Market Hypothesis.

 
Tyler Durden's picture

And Now Back To An Almost Record 2s10s Curve





Anyone else getting nervous that treasuries are becoming more volatile than stocks (even though VIX is higher on the day despite the 80/30/0 degree equity rally)?

Udpate: for about 2 seconds we were in historical record territory at 277.717 bps.

 
Tyler Durden's picture

2s10s Back to October Levels... Of 2003!





Quantitative Easing is dead and buried. The bond curve just hit a steepness that was last seen in October... not of last year but of 2003. The rush for near duration is accelerating as investors are running away from the 10 year like a herd of rabid buffaloes. If this continues it will destroy any plans for providing cheap 30 year mortgages. The alternative: make near durations unattractive to the point where banks start losing money from the curve flattening.

 
Tyler Durden's picture

Updated UST 2s10s Chart





10 Years today rallied to the highest level since the QE announcement, at 3.015%. Additionally, the 2s10s curve is now 10 bps steeper than the pre Quantitative Easing announcement. Just in time for the Fed's QE v2.0 announcement tomorrow. What is another trillion in treasury purchases to US taxpayers? Someone has to pad Bill Gross' pocket. We should all be grateful for the privilege.

 
Tyler Durden's picture

Updated UST 2s10s Chart





10 Years today rallied to the highest level since the QE announcement, at 3.015%. Additionally, the 2s10s curve is now 10 bps steeper than the pre Quantitative Easing announcement. Just in time for the Fed's QE v2.0 announcement tomorrow. What is another trillion in treasury purchases to US taxpayers? Someone has to pad Bill Gross' pocket. We should all be grateful for the privilege.

 
Tyler Durden's picture

Treasury 2s10s Curve Steeper Than Pre QE Announcement





Things for the Treasury sure aren't looking pretty. With the 10 year about to break 3% outright, the 2s10s chart has just passed pre-Quantitative Easing levels. With Treasury supply really starting to ramp up, this could be a bad sign for agencies and mortgage rates. This happens as the TIPS auction is largely oversubscribed. Seems that the market is happy to jump over the next 2-3 years of deflation and is looking straight at 2013.

 
Tyler Durden's picture

Treasury 2s10s Curve Steeper Than Pre QE Announcement





Things for the Treasury sure aren't looking pretty. With the 10 year about to break 3% outright, the 2s10s chart has just passed pre-Quantitative Easing levels. With Treasury supply really starting to ramp up, this could be a bad sign for agencies and mortgage rates. This happens as the TIPS auction is largely oversubscribed. Seems that the market is happy to jump over the next 2-3 years of deflation and is looking straight at 2013.

 
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