It's all about rates this largely newsless morning, which have continued their march wider all night, and moments ago rose to 2.873% - a fresh 2 year wide and meaning that neither Gross, nor the bond market, is nowhere near tweeted out. As DB confirms, US treasuries are front and center of mind at the moment.... the 10yr UST yield is up another 4bp at a fresh two year high of 2.87% in Tokyo trading, adding to last week’s 20bp selloff. As it currently stands, 10yr yields are up by more than 120bp from the YTD lows in early May and more than 80bp higher since Bernanke’s now infamous JEC testimony. We should also note that the recent US rates selloff has been accompanied by a rapid steepening in the rate curve. Indeed, the 2s/10s curve is at a 2 year high of 250bp and the 2s/30s and 2s/5s are also at close to their highest level in two years.
If the following just released forecast of where the 10 Year is going, from Bank of America's chief technical strategist MacNeill Curry is accurate, not only is the bond bottom nowhere near but we sense a Tweetstorm is coming from Bill Gross.
Just in case there is still some confusion about what passes for a "catalyst" in this market, moments ago just as the 10 Year was threatening to run away on its unmerry way to 3.00% and higher in the aftermath of the fatalistic tweet by Bill Gross, there promptly emerged, since it is 3pm on a Friday after all, a rumor that Hilsenrath was about to hit public on the latest NYFed plant handed to him in order to stabilize the market. Not in itself surprising: we have seen it a million times in the past, the only difference is that this time the target of the WSJ "intervention" would be the bond market, not stocks. Which is the saddest thing: while idiot stocks traditionally move on the dumbest of triggers, at least bonds had been immune from such stupidity. To see even the bond market succumb to the lowest of rumormonerging, is indeed a slap in the face.
Bonds are being sold off as concerns about the Fed's taper (aka the Zero Hedge-penned in May "Taper Tantrum") propagate through the bond market, and as Bill Gross reminds everyone of what a non-centrally planned, and Fed-backstopped, market may one day look like (nothing good). But today's action is nothing compared to what a real tapir tantrum looks like as one unluckly child and its mother were forced to find out.
Bill Gross Tweets: "Without Central Bank Check Writing, We Only Have Ourselves To Sell To" Sends Yields SoaringSubmitted by Tyler Durden on 08/16/2013 11:54 -0500
Gross: Pogo said, We have met the enemy & he is us. I say, All asset mkts peaking; W/o central bank ck writing we only have ourselves 2sell2
— PIMCO (@PIMCO) August 16, 2013
As JPM's Michael Feroli notes, the September FOMC Taper announcement (which certainly isn't assured, although if the Fed does not taper, it will end up monetizing 0.4%-0.5% of the total private TSY stock per week before year end) may just be a sideshow to a previously undiscussed main event: the Fed's first forecast of 2016 interest rates.
Succinctly summarizing the positive and negative news, data, and market events of the week...
Gross: Strategists/writers I follow? Dalio, Durden, Bianco, Arnott, Aitken, Santelli, Grant, Grantham, Inker, Marks, Quaintenance & Brodsky
— PIMCO (@PIMCO) August 9, 2013
From Bill Gross: "Capitalism depends on the successful offering and capture of carry in its multiple forms. If capitalism is faltering (recession) in developed/developing economies and yields are close to the zero bound, then portfolios should have less carry than before. If prospects are mediocre, portfolios should be overweight carry. If prospects are very bright, they should again be underweight bond carry. If we can be mindful of this, and accurately forecast it, we will be successful. This may be the most important conceptual change I have ever written about in an Investment Outlook. Readers who have stuck with this Outlook at least to this point have a scoop, if not a magic feather."
— PIMCO (@PIMCO) August 7, 2013
We had absolutely no concern about the outcome of today's 5 Year auction: after all, when push comes to shove, Bill Gross who yesterday was pitching 5 Year bonds to twitter would have certainly bought up the entire issue. Yet we were surprised to find that Direct Bidders, among which such bond kings as PIMCO, tendered only $6 billion (a 47% hit rate) in bids into today's $35 billion auction. Odd - could Bill Gross have been untruthful in expressing his interest in the bond and was merely looking for greater fools? Unpossible.
— PIMCO (@PIMCO) July 23, 2013
Gold surged over 3% yesterday due to what appears to be have been significant short covering due to concerns about gold backwardation and the continual haemorrhaging of gold inventories from the COMEX.
Concerns about a default on the COMEX, once the preserve of a few observant market watchers, are becoming more widespread as we appear to be witnessing a run on the highly leveraged bullion banking system.
Very robust physical demand from the Middle East, Asia and particularly China and a decline in the dollar also helped prices log their biggest one-day gain in over a year and their first close above $1,300 an ounce in nearly five weeks.
Gains in silver futures, meanwhile, outpaced gold’s rise, with silver surging 5%.
- Earthquake Sends Kiwis Screaming From Wellington Buildings (BBG)
- China quake death toll more than doubles to 54, hundreds hurt (Reuters)
- In 2011, Michigan Gov. Snyder said bankruptcy wasn't an option for Detroit. Two years later, he changed his mind (WSJ)
- GlaxoSmithKline says Chinese laws might have been violated (FT)
- SEC Tries Last Ditch Move to Put SAC’s Cohen Out of Business (BBG)
- Detroit’s Bankruptcy Reveals Dysfunction Common in Cities (BBG)
- Obama to start new offensive on economy (FT)
- As WTI and Brent reunite, Gulf of Mexico faces squeeze, not glut (Reuters)
- Extended Stay Files for Public Offering (WSJ)
- Apple Developer Website Hacked: Developer Names, Addresses May Have Been Taken (MacRumors)
- Treasuries Not Safe Enough as Foreign Purchase Pace Slows (BBG)
Don't look now but futures are up as usual, driven higher by both good and bad news. The biggest event of the weekend, if largely priced in, was the victory by Abe's coalition in the upper-house leading to the following seat breakdown. Of course, judging by the Yen and market reaction, which barely managed to eek out a gain: its first in four trading days, the event was largely of the "sell the news" type despite such bold proclamations: "Abe’s victory in the upper house is bullish for Japanese equities and the Japanese economy as a whole, as the removal of political headwinds bolsters the government’s ability to press forward with all ‘three arrows’ of its growth strategy," John Vail, Tokyo-based chief global strategist at Nikko Asset Management Co., which manages $162 billion, wrote in an e-mail. Elsewhere in Europe, Portugal bond yields have plunged by roughly 60 bps on news that the Portuguese President Silva has backed the centre-right coalition government, consequently ruling out snap polls. Well, what else is he going to do? This also comes on the heels of a Goldman report that said a second bailout for the country will be necessary and will likely be discussed in the fall. That too is bullish. What also was bullish in Europe apparently is that government debt hit a new record high of 92.2% of GDP. Remember: debt is wealth so just buy more futures. Looking forward to the US, the market will focus on the latest existing home sales data, the Chicago Fed activity index, as well as earnings report releases from McDonalds, Texas Instruments and Halliburton and a bunch of other companies that will beat EPS and miss revenues.